“The OTC market has seen continued appetite for gold from institutional and high-net-worth investors, as well as family offices, as they turn to gold for portfolio diversification,” Street continues.
“On the other hand, demand from jewellery tumbled last quarter as prices continued to hit highs, which also tempted some retail investors to take profit.”
The jewellery sector, traditionally a major consumer of gold, witnessed a substantial decline in demand during Q2 2024.
This downturn was primarily attributed to the unprecedented surge in gold prices.
Consumers, particularly in major markets like China and India, showed price sensitivity, leading to a significant pullback in jewellery purchases.
In China, gold jewellery demand plummeted by 35% year-over-year, the region’s weakest second quarter since 2009.
The combination of escalating gold prices and a slowing domestic economy dampened consumer sentiment and constrained affordability.
Similarly, India experienced a 17% year-over-year drop in jewellery demand, reaching its lowest point since the COVID-19 pandemic in 2021.
“In India, the recently announced import duty cut should create positive conditions for gold demand, where high prices have hampered consumer buying,” says Street.
In contrast to the jewellery sector's struggles, the technology sector emerged as a key driver of gold demand growth in Q2 2024.
The increasing use of gold in high-end chips for artificial intelligence (AI) and high-performance computing applications fuelled a substantial 11% year-over-year rise in gold used for industrial purposes.
Uptake in electronics, in particular, showed a remarkable 14% year-over-year increase.
Major chip manufacturers reported robust demand and strong financial results, with much of their high-end memory chip production already reserved for 2024 and 2025.
The AI hype train and the expanding application of high-performance computing is expected to sustain this upward trajectory in gold demand from the technology sector.
While record-high prices dampened jewellery demand, the technology sector's burgeoning appetite for gold provided a crucial counterbalance.
Total gold supply increased by 4% year-over-year, reaching 1,258 tons, with mine production hitting a record high for Q2, while recycled gold supply also rose by 4%.
Central banks also continued to be significant buyers of gold, driven by concerns about portfolio diversification and protection against geopolitical risks.
“Looking ahead, the question is: what will be the catalyst to keep gold front and centre in investment strategies?” says Street
“With a long-awaited rate cut from the US Fed on the horizon, inflows into gold ETFs have increased thanks to renewed interest from Western investors.”
While there are potential headwinds for gold ahead, there are also changes taking place in the global market that should support and elevate gold demand
Gold’s market trajectory remains uncertain.
The jewellery sector's recovery may hinge on consumer adaptation to higher prices and potential shifts in economic conditions.
Meanwhile, the technology sector's demand for gold should remain robust, supported by the ongoing advancements in AI and high-performance computing.
The evolving dynamics between these sectors will shape the gold market's future, making it an intriguing space to watch for investors and industry stakeholders.
