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Record High Gold Demand in 2024 Driven by Central Banks and Investment Amid Geopolitical Tensions

Emilia Wright | February 5, 2025

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World’s Demand for Gold Hits Record High in 2024 Amid Geopolitical Tensions

The World Gold Council recently released its annual report revealing that global demand for gold reached an all-time high in 2024. A significant rise in central bank purchases, coupled with an uptick in investment demand, was instrumental in pushing the total gold transactions to 4,974 tons, a notable increase from 4,899 tons in 2023. This unprecedented surge in demand highlights the increasing importance of gold as a safe-haven asset amid ongoing economic and geopolitical uncertainties.

Central Banks Lead the Charge

According to Shaokai Fan, the global head of central banks at the World Gold Council, “In 2024, global gold demand surged to a new quarterly high and a record annual total bolstered by heightened geopolitical and economic uncertainties.” The appetite for gold among central banks remained robust, achieving a “significant milestone” with purchases surpassing 1,000 tons for the third consecutive year.

The National Bank of Poland emerged as the largest net purchaser, adding 90 tons to its reserves, closely followed by Turkey’s Central Bank, which increased its holdings by 75 tons. The Reserve Bank of India also played a crucial role, conducting consistent monthly purchases throughout the year except for December.

Investment Demand Skyrockets

Investment in gold rose sharply, climbing 25% year-on-year to reach a four-year high of 1,180 tons. This increase was primarily fueled by the popularity of gold exchange-traded funds (ETFs). The report highlighted that demand for gold bars and coins experienced a similar upward trajectory, driven by consistent buying from major markets like China and India. With a lack of appealing alternative investment options, Chinese investors turned to gold, exacerbated by uncertainty in domestic economic conditions and volatile equity markets.

In India, government policy changes played a role in boosting demand. The reduction of gold import duties from 15% to 6% in July fueled investments. Demand was also notably strong across ASEAN markets, with countries such as Singapore, Indonesia, Malaysia, and Thailand reporting double-digit increases in gold investment year-on-year.

OTC Investments and Wealth Management

Over-the-counter (OTC) investments remained stable, signifying the intent of high-net-worth individuals to hedge against geopolitical and economic uncertainties. OTC transactions signify a direct deal between two parties, rather than through a traditional exchange, making this avenue particularly appealing for savvy investors.

Jewelry Demand Continues to Struggle

While various sectors demonstrated growth, the jewelry market faced challenges, seeing a year-on-year consumption decline of 11%. The drop in demand for gold jewelry can be attributed to rising gold prices, which have remained high, putting pressure on consumer spending. As analysts from the World Gold Council pointed out, demand in this sector is expected to remain weak due to consumers’ diminishing purchasing power and slowing economic growth.

Gold Prices Amid Economic Uncertainty

Gold prices reached significant heights throughout the year, recording 40 all-time highs in 2024 alone. As of Wednesday, gold futures traded on the New York Mercantile Exchange at $2,875.80 per ounce, signaling the ongoing attractiveness of gold amidst uncertain market conditions.

Outlook for 2025

Looking ahead, experts from the World Gold Council anticipate that central banks will continue to dominate the gold market, with gold ETF investments expected to gain momentum, especially if interest rates remain low yet volatile. Louise Street, a senior markets analyst at the Council, stated, “In 2025, we expect central banks to remain in the driving seat, and gold ETF investors to join the fray, especially if we see lower, albeit volatile interest rates.” The forecast indicates an enduring healthy investment demand for gold in 2025, as lower interest rates would minimize the opportunity costs associated with holding gold.

Conclusion

The record-high demand for gold in 2024 sheds light on the asset’s growing significance as a security during times of economic instability. With central banks leading the charge and investment demand flourishing amidst geopolitical tensions, the gold market is poised for continued strength in the coming years.