The World Gold Council (WGC) has published its long-awaited Demand Trends report for the first quarter of 2024, echoing the view that central banks have maintained their buying appetite despite rising prices.
In addition, the report showed that demand for gold bars and coins remains strong and noted a significant increase in open interest on both the Shanghai Futures Exchange (SHFE) and the Shanghai Gold Exchange in mid-April.
“Overall, total demand increased 3% year-on-year to 1,238 tonnes (mt), despite outflows of 114 million tonnes from the total ETFs, mainly from Europe and the US. The reverse is true for some Asian ETFs, which saw modest buying,” UBS strategists said in a report discussing the numbers.
They also highlighted that central banks bought around 290 tonnes of gold in the first quarter, exceeding both IMF reports and expectations of 220 tonnes per quarter for 2024, pointing to the potential for a third consecutive year of more than 1,000 tonnes is purchased.
Meanwhile, jewelery demand remained robust with industrial demand up 10% year-on-year. Gold supply from mining and recycling also increased by 4% and 12% respectively year-on-year.
Within this framework, UBS strategists maintained their forecast that gold prices could reach $2,500 per ounce in late 2024 or early 2025.
However, they acknowledge that the current price declines pose near-term risks that could be exacerbated if robust U.S. economic data leads to further delays in the Federal Reserve’s expected rate cuts.
“That said, withdrawals are common and relatively short-lived. So we see opportunity to use structured strategies to “buy the dip” around $2,250/oz or lower,” strategists said.
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