Gold sustained its position as one of the best-performing assets in 2024, rising by 12 per cent year-to-day (y-t-d), outpacing most major asset classes in the process, the World Gold Council (WGC) said in its ‘Mid-Year Outlook’ report.
Gold highs were reported on the back of continued central bank buying, Asian investment flows, resilient consumer demand, and a steady drumbeat of geopolitical uncertainty.
According to WGC, gold breached record highs multiple times between mid-March and mid-May, 2024, providing double-digit returns across multiple currencies.
Factors Pushing Gold’s High Performance
Three factors majorly contributed to gold’s continued performance as one of the best assets, according to the report.
Asian Investors
Asian investors have been important contributors to gold’s recent performance. Due to an increase in demand for gold bars and coins, gold exchange-traded funds (ETF) flows, and anecdotally, in the over-the-counter market, Asian investors kept the momentum high, the WGC said.
“In the past, Asian investors tended to buy on dips, but more recently, they have followed the trend,” the report said.
The report also pointed to the growth in assets under management (AUM) in both Indian and Chinese gold ETFs.
Gold had an upward movement in early Q2. The Chinese investor demand was partly supported by positive sentiment linked to central bank buying.
Central Banks
Among other factors, the continued demand by central banks has been a key driver of gold’s performance in recent years.
WGC estimates that this buying trend has contributed at least 10 per cent to gold’s performance in 2023, and potentially around 5 per cent so far in 2024.
A survey conducted by WGC earlier in June 2024 found that 29 per cent of central banks say they want to add more gold in the coming 12 months. A huge 81 per cent of those surveyed believed that the official sector gold reserves would show an increase, while 69 per cent said that the gold’s share of reserves would be higher.
Incidentally, the Reserve Bank of India (RBI) had purchased over 19 tonnes of gold during the first quarter of 2024 (Q1-CY24 / Q4-FY24), surpassing the 16 tonnes it had purchased throughout the entirety of 2023, according to a previous WGC report.
Consumer Demand
Gold consumers play a significant role in supporting, and sometimes, slowing down the performance of this precious metal, based on two factors, namely, price and income.
WGC said in its report: “The sharp upward trend in the gold price has dampened demand in some markets, such as India and China. But positive economic growth can counteract some of this effect.”
Price Stability Could Attract Indian Buyers
In addition, a possible stability in gold prices has the potential to attract consumers who often respond more negatively to market volatility than the level of the gold price. One reason for this behaviour is that gold is typically seen as a ‘safe investment’ by the majority of the population.
“This may be particularly relevant for India, where expectations of economic growth are higher than in other regions and gold’s role as a store of value is well-cemented,” WGC said in its report.
