The Rise of Gold in 2024: Central Banks and Professional Investors Driving Demand

Key Takeaways

• Gold has been one of the best-performing global assets of 2024, with central banks propelling much of the demand.
• Global official gold reserves increased by 290 metric tons in the first quarter of the year, the largest first-quarter increase since at least 2000, according to the World Gold Council.
• More North American professional investors reported higher gold allocations in 2023 than in the years right before the pandemic.
• The World Gold Council called gold “a market in search of a catalyst” in its midyear outlook.

Gold has been shining bright in 2024, emerging as one of the best-performing global assets. Central banks have played a significant role in driving demand for the precious metal. Led by countries like China, Turkey, and India, central banks have been on a gold-buying spree, adding over 1,000 metric tons of gold in both 2022 and 2023. This trend has continued into 2024, with global official gold reserves increasing by 290 metric tons in the first quarter of the year, marking the largest first-quarter increase since at least 2000.

In May, central banks reported purchasing a staggering 10 trillion metric tons of gold, as per data from the International Monetary Fund (IMF) and other sources. The 2024 Central Bank Gold Reserves Survey revealed that nearly a third of central bank respondents plan to further increase their gold reserves over the next year. This move is driven by a desire to rebalance their strategic gold holdings, domestic gold production, and concerns related to financial market risks such as inflation.

North American Professional Investors Raise Allocation

Aside from central banks, North American professional investors have also been increasing their exposure to gold and reaping the benefits of higher prices. A recent survey conducted by the World Gold Council found that 85% of professional investors reported having an allocation to some form of gold investment in 2023, up from 69% in 2018 and 76% in 2019. These investors view gold as an excellent portfolio diversifier, an inflation hedge, and a risk reducer.

Outlook for Gold in Second Half

The spot price of gold has seen a significant increase of 12.7% year-to-date in 2024, positioning it as one of the top-performing assets. As of the latest data, the price of gold stands at around $2,324, approximately 5% below its all-time high reached in May. The World Gold Council’s midyear report suggests that the current price reflects consensus expectations for the second half of the year but also hints at a potential for gold to outperform.

The council believes that the global economy and gold itself are awaiting a catalyst for further growth. Factors such as falling rates in developed markets attracting Western investment flows, ongoing support from global investors seeking to hedge risks in a complacent equity market, and persistent geopolitical tensions could serve as catalysts for gold’s future performance.

As we move forward into the second half of 2024, all eyes are on gold as it continues to attract interest from central banks and professional investors alike. With a strong performance so far this year and promising outlook ahead, gold remains a shining star in the world of investments.

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