Published: November 8, 2024
In a remarkable turn of events, the World Gold Council (WGC) has reported that global gold demand has surged to unprecedented levels, surpassing $100 billion for the first time in history. This milestone reflects a growing global appetite for gold, driven by a combination of investment trends, geopolitical tensions, and local economic factors. As the world grapples with uncertainty, gold continues to shine as a safe haven asset.
Thai Gold Demand Soars
Thailand has emerged as a standout player in the gold market, showcasing an impressive 11% year-on-year increase in demand during the third quarter of 2024. The country consumed 14.5 tonnes of gold, marking the highest growth rate among ASEAN nations for the second consecutive quarter. This surge can be attributed to various factors, including the recent announcement of a digital wallet handout by the Thai government, aimed at stimulating the local economy.
Shaokai Fan, head of Asia-Pacific (ex-China) at the WGC, noted that the government’s initiative, which began rolling out at the end of the third quarter, is expected to further bolster demand in the upcoming months. “Consumer demand in Thailand was resilient,” Fan remarked, highlighting the positive impact of government measures on gold consumption.
Global Demand on the Rise
Globally, gold demand has also shown robust growth, with a 5% increase year-on-year, reaching a record 1,313 tonnes in the third quarter. This surge in demand has been largely fueled by a significant rise in investment, particularly in gold exchange-traded funds (ETFs). Investment demand more than doubled compared to the previous year, totaling 364 tonnes, as Western investors shifted their focus towards gold as a hedge against economic uncertainty.
Interestingly, while global bar and coin demand saw a decline of 9%, Thailand’s demand for these forms of gold rose by 15%, reaching 12.1 tonnes. This divergence underscores the unique dynamics of the Thai market, where consumers are increasingly turning to gold as a reliable store of value.
Geopolitical Tensions and Economic Concerns
The backdrop of global geopolitical tensions and local economic uncertainties has played a pivotal role in shaping gold demand. Investors in ASEAN countries, including Thailand, Indonesia, and Malaysia, exhibited a strong appetite for gold, with all three nations recording double-digit growth in demand during the third quarter. The fear of missing out (FOMO) among investors, driven by bullish price expectations and the prospect of future interest rate decreases, has further fueled this trend.
Louise Street, a senior markets analyst at the WGC, emphasized that the current environment has encouraged investors to buy into the momentum of rising gold prices. “A ‘FOMO factor’ among investors has been a key driver of increased demand this quarter,” she stated, pointing to the role of gold as a safe haven amid escalating conflicts in the Middle East and political uncertainty in the United States.
Jewelry Consumption and Technological Demand
Despite the overall increase in gold demand, the jewelry sector faced challenges due to soaring gold prices. Total jewelry consumption fell by 12% year-on-year in volume terms, although it rose by 13% in value, indicating that consumers are willing to spend more on smaller quantities of gold products. This trend reflects a shift in consumer behavior, where quality and value take precedence over quantity.
On a brighter note, demand for gold in technology grew by 7% year-on-year, driven by the booming electronics sector and the ongoing AI revolution. As technology continues to evolve, the demand for gold in various applications is expected to remain strong.
Supply Dynamics and Future Outlook
The total supply of gold increased by 5% year-on-year, with mine production rising by 6% and recycling up by 11%. However, central bank buying of gold slowed in the third quarter, although demand remained robust at 186 tonnes. Year-to-date central bank demand reached 694 tonnes, consistent with the same period in 2022.
Looking ahead, the WGC anticipates that the trend of increased investment flows into gold will continue, potentially keeping both demand and price levels elevated. However, the record-high prices present challenges for consumers, and the prospect of economic growth will be a crucial factor to monitor in the coming months.
In conclusion, the global thirst for gold has reached unprecedented levels, with demand exceeding $100 billion for the first time. As geopolitical tensions persist and economic uncertainties loom, gold remains a sought-after asset, providing a sense of security for investors and consumers alike. The evolving dynamics of the gold market will undoubtedly continue to shape the financial landscape in the years to come.
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