Good evening
Gold, gold and more gold
Australia’s gold exports rose by 41% year-on-year to $8.5 billion in the March quarter 2024, a record in nominal terms. The gain was driven by higher gold prices and a weaker Australian dollar (export unit value up by 26%) and a 12% year-on-year increase in export volumes.
World gold demand decreased by 5.3% year-on-year to 1,100 tonnes in the March quarter 2024. This fall was largely driven by a 28% decline in investment demand, with central bank demand continuing to be elevated.
Official sector (central banks and other government financial institutions) gold buying rose marginally year-on-year to 290 tonnes in the March quarter 2024 — a record March quarter total. Official sector demand has been strong since mid-2022, with purchases dominated by emerging market central banks eager to lift gold reserves to diversify their reserve portfolio and boost the liquidity of reserves.
According to World Gold Council data for declared gold purchases, Türkiye was the largest buyer, adding a reported 30 tonnes (or 6%) to its reserves. China continued to make significant purchases over the quarter, acquiring a reported 27 tonnes to bring gold reserves up to a total of 2,262 tonnes — up by 16% since reported purchases recommenced in October 2022. Other notable central bank purchases were reported for India (19 tonnes), and Kazakhstan (16 tonnes).
Gold purchases by non-government buyers were lower year-on-year in the March quarter 2024, with slight growth in technological applications offset by weaker investment demand, particularly in gold-backed exchange-traded funds (ETFs).
Investment in gold bars and coins increased by 2.8% year-on-year in the March quarter 2024, supported by record prices in major markets.
Bar and coin investment in China rose sharply to a 7-year high of 110 tonnes. Demand was supported by a weaker Yuan and a weak and volatile performance from other asset classes (such as property and shares). Bar and coin investment rose strongly (by 19%) in India, supported by the continued weakening of the Rupee and the strong price outlook.
A total of 114 tonnes of gold flowed out of gold-backed ETFs in the March quarter 2024, following 245 tonnes of outflows in 2023. (ETF outflows are counted as reducing gold demand, while inflows are counted as additional.) Demand for gold ETFs remained weak in Western markets due to high bond yields and stronger currencies, while ETFs have continued to grow in Asia — especially in China.
Global gold jewellery demand declined by 2.0% year-on-year in the March quarter 2024. Jewellery consumption fell in volume terms due to record domestic prices in many markets — particularly China. However, consumer demand was still strong, as indicated by 7% year-on-year growth in value terms to US$32 billion. Jewellery consumption in China fell by 6% year-on-year to 184 tonnes, with a price surge through March compounding the usual post-Lunar New Year lull in spending.
Demand for gold in technology increased by 10% year-on-year to 79 tonnes in the March quarter 2024. Recovery and growth in electronics demand (such as for AI-enabled consumer products) increased demand for gold in electronics such as light-emitting diodes and memory chips.
Strong investment demand to drive gold consumption to a peak in 2024
World gold consumption is forecast to rise by 1.9% to 4,500 tonnes in 2024 (Figure 10.1). This increase is expected to be mainly driven by growth in investment demand (particularly for gold bars and coins) and to a lesser extent, a rebound in consumer electronics demand.
World supply increased in the March quarter 2024 World gold supply increased by 2.6% year-on-year to about 1,240 tonnes in the March quarter 2024, driven by both higher mine production and increased recycling. Global mine production reached 890 tonnes in 2023, the highest March quarter total on record. Production growth was led by China, Canada, Indonesia and Ghana.
Production in China — the world’s largest gold producing nation — rose marginally year-on-year to 86 tonnes in the March quarter 2024. The World Gold Council reported increased output from the key provinces of Shandong and Henan, while output from lower grade operations is expected to expand in response to high prices.
In Australia — the world’s third-largest gold producing nation — output decreased by 4.0% year-on-year to 69 tonnes in the March quarter 2024. Production was lower due to disruptions from heavy rainfall in March, alongside decreasing mine grades and several mine closures.
Production in Canada rose by 2.2% year-on-year to about 49 tonnes in the March quarter 2024, with higher production reported at Agnico Eagle’s Meadowbank complex (up by 15% year-on-year) and Argonaut’s Magino mine continuing to ramp up after initial production in June 2023.
Output in Ghana is estimated to have risen by 15% year-on-year as operations improved at the Ahafo mine (following outages to the mine’s processing facilities).
Indonesian output is also expected to have risen by about 14% year-on-year due to a rise in output from the Grasberg mine.
Gold recycling increased 12% year-on-year to 351 tonnes in the March quarter 2024 — the strongest March quarter total in 10 years — largely due to record gold prices in China. Recycling activity outside of China was weaker than expected given the higher prices. This is possibly the result of high levels of recycling in recent years — which has limited the stocks of jewellery ready for recycling — or because consumers in nations with a high degree of economic or geopolitical uncertainty (such as Egypt, Iran and Türkiye) now prefer to hold onto their gold as a safe-haven asset.
World gold supply to peak in 2025 as new projects come online. World gold supply is forecast to rise on average by 1.6% a year from 2023, peaking at 5,090 tonnes in 2025. Increasing world gold mine production will be supported by further strength in recycling activity (Figure 10.3).
Resources and Energy Quarterly | June 2024
Have a very nice Friday.
Kind regards
rcw1