The World Gold Council's Q2 2024 report, released on July 30, reveals that total gold demand including over-the-counter (OTC) investment reached 1,258 tonnes, up 4% year-on-year and marking the highest second-quarter level in the data series going back to 2000. The surge was primarily fueled by central bank purchases and OTC investments, offsetting a sharp decline in jewelry consumption due to record-high gold prices.
Central Bank Buying and OTC Investment Lead Growth
Central banks increased their gold reserves by 184 tonnes in Q2, a 6% rise year-on-year, driven by the need for portfolio protection and diversification against geopolitical risks and currency devaluation. OTC investment also contributed significantly, adding to the overall demand momentum. Excluding OTC, gold demand fell 6% year-on-year to 929 tonnes, as a sharp drop in jewelry consumption outweighed mild gains in other sectors.
Jewelry Demand at Four-Year Low
Jewelry demand plummeted 19% year-on-year to 391 tonnes, its lowest level in four years. The average gold price in Q2 was $2,338 per ounce, peaking at $2,427 per ounce in May. High prices deterred consumers, particularly in price-sensitive emerging markets such as India and China, where festival and wedding-related purchases were weak.
Technology Sector Gold Demand Soars on AI Trend
Gold used in technology jumped 11% year-on-year, driven by the artificial intelligence (AI) boom. The demand came from sectors such as semiconductors, electronic components, and connectors used in AI servers and data centers. AI's need for high-performance, reliable materials continues to boost gold consumption in electronics manufacturing.
Supply Reaches Record Highs
Total gold supply grew 4% year-on-year to 1,258 tonnes. Mine production of 929 tonnes was a record for a second quarter, while recycling supply reached the highest second-quarter level since 2012, as high prices encouraged scrap gold recovery. The increases highlight the responsiveness of both primary and secondary supply to elevated prices.
ETF Outflows and Bar/Coin Weakness
Global gold exchange-traded fund (ETF) holdings declined by 7 tonnes in Q2, while retail bar and coin investment fell 5% to 261 tonnes, primarily due to weak demand from Western markets where investors shifted focus to other assets. However, central bank buying and OTC investment provided a strong counterbalance, underlining gold's enduring appeal as a strategic reserve and industrial material.
The report underscores the dual nature of gold demand: while jewelry consumption suffers under high prices, institutional and technological demand remains robust. As AI and central bank diversification trends continue, gold is poised to maintain its role in both financial and industrial spheres.