Gold to hit fresh highs in 2024 | Article

Meanwhile, central banks have continued to boost their gold reserves. Central banks purchased around 800 tonnes of gold over the first three quarters of 2023, 14% ahead of the same period last year, according to data from the WGC.

This was a record amount bought for a nine-month period, as geopolitical concerns pushed central banks to increase their allocation towards safe assets. Central banks’ healthy appetite for gold is also driven by countries’ concerns about Russian-style sanctions on their foreign assets, following the decision of the US and Europe to freeze Russian assets, and shifting strategies on currency reserves.

Central banks increased their gold purchases to 337 tonnes over the third quarter of the year primarily due to higher buying from China (+78 tonnes), Poland (+57 tonnes), Turkey (+39 tonnes) and India (+9 tonnes). China has been the largest buyer of gold this year amid an 11-month buying streak. The People’s Bank of China has purchased 181 tonnes this year, taking gold holdings to 4% of its reserves.

This insatiable appetite has helped gold prices defy surging bond yields and a strong dollar for most of the year.

Gold tends to become more attractive in times of instability, and demand has been surging over the past two years. Last year, global central banks purchased a record 1,136 tonnes of gold, compared to 450 tonnes bought in 2021, mostly driven by a flight towards safer assets amid soaring inflation. Last year was not only the thirteenth consecutive year of net purchases, but also the highest level of annual demand on record back to 1950.

We expect central banks to remain buyers and to near or exceed last year’s purchases in 2023 due to geopolitical tensions and the economic climate.

This continued central bank buying amid stronger investment demand sets gold up to move higher through 2024.