Joe Cavatoni: What's Next for Gold After 2023's Record Total Demand?

TL;DR

The World Gold Council's latest report reveals record-setting gold demand in 2023, driven by geopolitical and systemic issues, with Central Banks being the standout buyers. However, investment in gold, particularly through ETFs, fell to a 10-year low.

Transcript

I'm Charlotte McLoud with investing news.com and here today with me is Joe katoni market strategist Americas at theor Gold Council thank you so much for being here great to have you great to be back Charlotte thank you really good to be checking in with you today the world gold Council has just released its latest gold demand Trends report so I tho... Read More

Key Insights

• 😫 Gold demand in 2023 was driven by geopolitical and systemic issues, contributing to a record-setting year.
• 🪐 Central Banks, particularly in Emerging Markets, continued their trend of net buying.
• 🤢 Investment in gold, through ETFs, saw outflows and a decline in bar and coin demand, except in China and India.
• ✳️ Gold's price support is influenced by central bank buying, geopolitical risks, systemic risks, and hedging concerns.
• ✋ Mine supply is expected to have a steady increase, while recycling may see growth in markets with high gold consumption.
• 👀 The decline in investment through ETFs highlights the need to look beyond the surface to understand the full picture of gold demand.

Questions & Answers

Q: What contributed to the record-setting demand for gold in 2023?

The demand for gold was driven by geopolitical and systemic issues, as well as investments made by Sovereign wealth funds, high net worth individuals, and family offices.

Q: Which Central Banks were the standout buyers of gold in 2023?

China, Poland, and Turkey were the prominent buyers of gold among Central Banks in 2023.

Q: How accurate are the reported numbers for gold buying in China?

The World Gold Council uses validated data from partners and relies on IMF reporting, ensuring accuracy and reliability. The council also conducts surveys with different central banks to further validate the data.

Q: What is the outlook for Central Bank buying of gold in 2024?

The outlook for central banks to continue adding gold to their portfolios, particularly in Emerging Markets, remains strong due to dollar and Euro exposure, inflation concerns, geopolitical risks, and potential sanctions.

Q: Why did investment in gold, particularly through ETFs, fall to a 10-year low in 2023?

The decline in investment through ETFs was influenced by expectations of future rate cuts and investors seeking other opportunities. However, retail investment in bars and coins remained strong, with a notable trend in China and India.

Q: What are the factors that may impact gold's price support?

Central bank buying has been a significant support for gold prices in recent years. Additionally, geopolitical risks, systemic risks, and hedging concerns can contribute to gold's price support.

Q: How is gold supply expected to change in 2024?

Mine supply is expected to have a steady increase, while recycling is dependent on price levels. Higher prices may lead to more recycling in markets like India and Asia.

Q: Is the cost for gold mining manageable and expected to impact the industry significantly?

All-in sustainable costs for mining companies are manageable, although factors such as energy prices, staffing, environmental issues, and cost of capital may influence the industry. However, it is not expected to be disruptive.

Summary & Key Takeaways

• 2023 saw record-setting total gold demand of 4,899 tons, including a large volume of OTC trades by Sovereign wealth funds, high net worth individuals, and family offices.

• Central Banks continued their 14-year trend of net buying, with China, Poland, and Turkey being the prominent buyers.

• Investment in gold, particularly through ETFs, experienced outflows and a decline in bar and coin demand, except in China and India where retail investment remained strong.