• Global gold demand reached a record 4,974 tonnes in 2024, with central banks aggressively accumulating over 1,000 tonnes for the third consecutive year, driven by geopolitical risks and currency volatility
• The average gold price surged to a record US$2,386 per ounce, contributing to an unprecedented annual demand value of US$382 billion
• Despite a drop in gold jewellery consumption by 11% to 1,877 tonnes, spending on jewellery increased by 9% to US$144 billion, highlighting gold's enduring cultural significance

Harare- Global gold demand reached unprecedented levels in 2024, with total demand (including over-the-counter investment) rising by 1% year-on-year in the fourth quarter to achieve a new quarterly high.  This surge contributed to a record annual total of 4,974 tonnes (t), reflecting gold’s enduring appeal as a safe-haven asset and a hedge against economic uncertainty. 

Central banks were at the forefront of this demand surge, continuing their aggressive accumulation of gold for the third consecutive year. Purchases exceeded 1,000t annually, with a sharp acceleration in the fourth quarter, during which central banks bought 333t.

This sustained buying spree reflects growing concerns about geopolitical risks, currency volatility, and the need to diversify reserves away from traditional fiat currencies. 

The ongoing geopolitical tensions, particularly the Russia-Ukraine war (beginning in February 2022) and the war between Israel and Hamas (escalated in October 2023), have significantly influenced central banks' decisions to accumulate gold. These events have heightened uncertainty in global markets, fostering an environment where traditional fiat currencies are perceived as increasingly volatile.

Central banks, tasked with maintaining economic stability and safeguarding reserves, view gold as a safe haven asset. The psychological impact of geopolitical instability drives demand for gold, which is often seen as a protective measure against potential economic fallout, inflation, or currency devaluation.

Currency volatility further exacerbates this trend. In times of crisis, currencies can experience significant fluctuations, leading to diminished confidence among investors and institutions. Sanctions and economic disruptions stemming from the Russia-Ukraine war have impacted the value of the Russian ruble, which plummeted by over 40% in early 2022 before stabilizing due to strict capital controls.

Similarly, the Turkish lira has faced severe devaluation since 2018, losing over 80% of its value by 2023, prompting Turkey's central bank to increase its gold reserves. Another notable instance was the collapse of the Venezuelan bolivar, which entered hyperinflation in 2016, with annual inflation rates exceeding 1,000,000% by 2018. In response, the Venezuelan government and central bank turned to gold reserves to stabilize the economy and restore some level of financial credibility.

Additionally, the need for diversification is paramount as central banks aim to mitigate risks associated with over-reliance on any single currency or asset class. Gold's performance during previous financial crises has proven resilient, reinforcing its appeal. As central banks continue to accumulate gold, this demand can create upward pressure on prices, further incentivizing purchases. During the Eurozone debt crisis (2010-2012), central banks in countries like Germany and France increased their gold reserves to reduce dependence on the euro and protect against potential currency devaluation.

This move highlighted gold's role as a strategic asset in times of regional economic instability. Similarly, in 2022, central banks globally added a record 1,136 tons of gold to their reserves, the highest annual demand since 1967, according to the World Gold Council.

Meanwhile, annual gold investment reached a four-year high of 1,180t, marking a 25% increase compared to 2023 while a notable shift occurred in gold exchange-traded funds (ETFs), which saw holdings remain essentially unchanged in 2024 a contrast to the heavy outflows of the previous three years. This stabilisation signals renewed investor confidence in gold as a strategic asset. 

Bar and coin demand remained steady at 1,186t, mirroring 2023 levels. However, the composition shifted, with bar investment growing while coin buying declined. This trend suggests that investors are prioritising larger, more cost-effective forms of gold ownership. 

Gold’s role in technology also contributed to the overall demand increase, with annual technology demand growing by 21t (+7%) in 2024. This growth was largely driven by the continued expansion of artificial intelligence (AI) adoption, which relies on gold for its superior conductivity and reliability in advanced electronics. 

Gold jewellery was the outlier in an otherwise robust market, with annual consumption dropping by 11% to 1,877t.  High gold prices forced consumers to purchase smaller quantities, though spending on gold jewellery still rose by 9% to US$144 billion, reflecting the metal’s enduring cultural and economic significance. 

Meanwhile, the London Bullion Market Association (LBMA) gold price reached 40 new record highs during 2024, with the average fourth-quarter price hitting US$2,663 per ounce another record.

The annual average price of US$2,386/oz represented a 23% increase from 2023.  In value terms, gold demand reached unprecedented levels. The combination of record prices and volumes resulted in a fourth-quarter value of US$111 billion, pushing the annual total to a historic high of US$382 billion. 

Total gold supply increased by 1% year-on-year to 4,974t, matching the record demand. This growth was driven by a combination of higher mine production and increased recycling activity, ensuring that the market remained balanced despite the surge in demand. 

Looking ahead, the continued geopolitical and economic tensions, including the Russia-Ukraine war, the Israel-Hamas conflict, and the lingering effects of President Donald Trump’s trade wars with tariffs on China, the EU, and other allies are expected to significantly shape the gold market in 2025.

These conflicts and trade disputes will create a climate of heightened uncertainty, driving central banks and investors to seek safe-haven assets like gold. The Russia-Ukraine war has already disrupted global energy and commodity markets, while the Israel-Hamas conflict has added further instability to the Middle East, a region critical to global oil supplies. The trade wars initiated by the U.S. under the Trump administration, and the retaliatory tariffs will  further fragment global trade networks and increase economic uncertainty. These factors collectively contribute to a volatile environment where gold is likely to remain a preferred asset for risk mitigation.

In 2025, gold's outlook is projected to remain strong due to continued central bank accumulation, robust demand from gold ETF investors, and increasing geopolitical uncertainties. Central banks are expected to sustain their aggressive buying, potentially exceeding 1,000 tonnes for the fourth consecutive year, as they seek to diversify reserves away from fiat currencies amid heightened geopolitical risks, particularly from the ongoing Russia-Ukraine war and the Israel-Hamas conflict.

 Equity Axis News