The World Gold Council released its Q2 2024 Global Gold Demand Trends Report on July 30, showing that global gold demand increased year-on-year in the second quarter, but if OTC (over-the-counter) transactions are excluded, it actually decreased. Within this context, wealthy investors from Asia, aptly named “gold devourers,” have significantly driven up OTC trading volume by 53% year-on-year to 329 tons, offsetting the sharp decline in jewelry demand.
Specifically, boosted by the surge in OTC trading and continuous gold purchases by global central banks, the total global gold demand, including OTC transactions, increased by 4% year-on-year to 1,258 tons in the second quarter, marking the strongest Q2 demand record since this metric has been tracked. In the OTC market, particularly the demand for physical gold bars from Asian family offices was very strong. The report shows that excluding OTC transactions, Q2 global gold demand was 929 tons, a year-on-year decrease of 6%.
Joseph Cavatoni, the World Gold Council’s Chief Market Strategist for the Americas, said in an interview that wealthy individuals and asset managers from China and other Asian regions have flocked to the gold market to mitigate their growing concerns about credit, debt, and the financial environment. In the current rapidly changing environment, holding physical gold gives them a sense of “security.” According to Bloomberg data, more than a quarter of the world’s top 200 billionaires are located in Asia.
One important reason that Asian tycoons favor the OTC market when purchasing gold is its opacity. Most transactions are completed through dealers or are direct deals between buyers and sellers, without needing an exchange platform or clearing house. In contrast, influenced by high gold prices, global jewelry demand in Q2 fell by 19% year-on-year to 391 tons; global retail demand for gold bars and coins decreased by 5% year-on-year to 261 tons.
Earlier this month, gold prices hit a new high and have risen by about 15% this year. The World Gold Council expects gold prices to remain at current levels or slightly increase in the second half of the year.
Regarding the driving forces behind the global gold market, the World Gold Council’s report provided some insights. Firstly, the expectation of an imminent interest rate cut by the Federal Reserve has prompted more investors to enter the exchange-traded fund (ETF) market, with Asian region gold ETFs continuing to show inflows. Additionally, the continuous gold-buying demand from global central banks and increasing geopolitical tensions, such as the unpredictable U.S. elections, have also supported gold prices.
The report indicates that global official gold reserves increased by 184 tons in Q2, a year-on-year growth of 6%, although the growth rate slowed compared to Q1. Although China has paused its gold purchases, India’s and Poland’s central banks continue to buy. The World Gold Council’s annual central bank gold reserve survey shows that the surveyed central banks generally believe that in a complex geopolitical environment, gold reserves are likely to continue to increase over the next 12 months.
