Record Gold Demand Highlights Global Economic Worries

As a result of ongoing geopolitical unrest and China's economic slowdown, investors gravitated toward gold as a safe haven asset in 2023, according to a research by the World Gold Council.

With over-the-counter transactions and stock movements that account for changes in stocks on commodity exchanges included, the total amount of gold trades last year was 4,899 tons, compared with 4,741 tons in 2022.

OTC transactions are made directly between two parties, as opposed to trading that is done through an exchange.

The Israel-Hamas conflict, the Russia-Ukraine war, and the downturn in China's economy were the main factors driving demand for gold in 2023, and Shaokai Fan, head of central banks at WGC, predicted that these factors would continue to drive up the metal's price far into 2024.

Prices surged to an all-time high of $2,100 per ounce in December as both central banks and individual investors bought more gold; for the past two years, central bank purchases have topped 1,000 tons.

The data indicated that the People's Bank of China was the biggest purchase of gold at 225 tons last year, driving up its holdings to 2,235 tons. The real estate crisis in China has also driven more investors into gold.

A Hong Kong court ordered China Evergrande, formerly one of the biggest real estate developers in the nation, to liquidate after the business was unable to come to an eleventh-hour agreement to reorganize over the weekend.

The nation invested 28% more in gold coins and bars in 2023 than it did in 2021, totaling 280 tons.

According to data from the World Gold Council, in 2023 China overtook India as the world's biggest purchaser of gold jewelry.

In 2023, Chinese consumers purchased 603 tons of gold jewelry, a 10% rise from the year before. Fan pointed out that this was mostly because of an increase in marriages that were put off once the economy recovered from the epidemic in late 2022.

He went on to say that when the Lunar New Year draws near, gold sales would increase even more. He also mentioned that Asian tradition suggests that having children is auspicious in the impending Year of the Dragon.

Navigating Challenges in 2024 Amid Economic Slowdown and Inflation Concerns

According to the WGC study, this year is expected to be less favorable for weddings aside from rising gold prices and a slowdown in economic development. In India, there would be 16 lucky wedding dates in the first quarter, as opposed to 28 the previous year.

Because of the nation's price-sensitive market, sales of gold jewelry decreased by 6% in 2023 to 562 tons from the previous year, according to Fan.

Although it is doubtful that gold purchases would reach 2023 levels this year, a decline in inflation could keep demand from falling too much, according to WGC.

The United States' inflation rate for the year 2023 was 3.3%, which was higher than the Federal Reserve's objective of 2%. Fed Chairman Jerome Powell stated on Wednesday that the U.S. In March, the Federal Reserve was not anticipated to lower interest rates.

Gold prices fell by 3% as a result of the statement, and they were trading at $2,064 on Thursday morning in Asia.