High gold demand sets record, prices expected to rise further this year?

The World Gold Council has announced that there is a record high demand for gold in 2023, and the price of gold may continue to rise this year.


Gold prices are expected to reach a record high in 2023

The World Gold Council’s (WGC) Gold Demand Trends report reveals that consumer demand for gold in Vietnam will be influenced by global economic trends in 2023.

Specifically, annual gold demand (excluding over-the-counter markets) is projected to decrease to 4,448 tonnes in 2023, a 5% decrease compared to the significant increase in 2022. When combined with demand from the non-exchange-traded gold market and other sources, total gold demand will reach a new annual record of 4,899 tonnes.

According to the World Gold Council’s assessment, investment from this non-conventional demand has driven the average annual gold price in 2023 to its highest level in history.

The World Gold Council stated that central banks continued to maintain a rapid pace of gold purchases since 2022, resulting in the second-highest annual gold demand of 1,037 tonnes, a 45-tonne decrease compared to 2022.

Overall, consumer demand for gold in Vietnam decreased by 6% compared to the previous year, dropping from 59.1 tonnes in 2022 to 55.5 tonnes in 2023. Gold bar and gold coin demand also slightly decreased by 2% in 2023 to 40 tonnes. Notably, gold investment in Vietnam saw a strong increase in the fourth quarter due to price adjustments.

However, Vietnam has experienced a significant decline in the demand for gold jewelry, decreasing by 16% to 15 tonnes. This decline is reflected in four consecutive quarters of decrease compared to the previous year, attributed to slower economic growth and relatively high inflation in the region.

Shaokai Fan, Director for the Asia-Pacific (excluding China) region and Global Central Banks at the World Gold Council, stated that in Q4 2023, Vietnam experienced an increase in gold investment due to price adjustments. However, the limited increase in demand and investment options led to a substantial difference in the official SJC gold, reaching approximately $600-700 per ounce.

In contrast to the strong demand from the non-exchange-traded and central bank markets, global gold ETF (exchange-traded fund) flows continued outflows in 2023, consuming 244 tonnes, with the strongest outflows seen in Europe.

Global demand for gold coins and gold bars cooled, decreasing by 3% due to the strength in some markets offsetting weaknesses in others. In other ASEAN markets, including Vietnam, Malaysia, Indonesia, and Singapore, the demand for gold coins and gold bars decreased by 2%, 4%, 5%, and 8% respectively compared to the previous year.

Investment demand for gold in Europe continued to decline significantly, down by 59% compared to the previous year. This decline was offset by strong recovery after the COVID-19 pandemic in China, where annual retail gold investment demand increased by 28% to 280 tonnes, in addition to notable increases in India (185 tonnes), Turkey (160 tonnes), and the US (113 tonnes).

The global gold jewelry market showed considerable potential for recovery amid record high prices, with a 3-tonne increase in demand compared to the previous year. China played a crucial role, recording a 17% increase in gold demand as the country recovered from COVID-19 lockdowns, offsetting a 9% decline in India.

Gold production remained relatively stable in 2023, increasing by 1%. Scrap gold recycling increased by 9%, lower than expected due to higher gold prices, resulting in a 3% increase in total supply.

Factors driving gold prices

According to Louise Street, a Senior Market Analyst at the World Gold Council, stable demand from central banks once again supports gold demand this year, offsetting weaknesses in other market areas. This makes gold demand in 2023 higher than the 10-year average.

Besides monetary policy, political instability is often a key factor driving gold demand in 2024. This will have a significant impact on the market. Ongoing conflicts, trade tensions, and over 60 elections worldwide are likely to drive investors to turn to gold as it has long been seen as a safe haven asset, according to Louise Street.

The World Gold Council’s analysts also note that central banks often cite gold’s performance during crisis periods as a reason to buy, indicating that demand from this sector will remain high this year and may offset the decline in consumer demand due to higher gold prices and slower economic growth.

In the domestic market, gold prices broke through and SJC gold is now over 78 million VND/tael in the selling session on February 1, 2024. Meanwhile, the world spot gold price also increased slightly, fluctuating around $2,040/ounce.

Specifically, at 4 PM on February 1, SJC Gold Trading and Jewelry Company listed buying prices at 76 million VND/tael and selling prices at 78.3 million VND/tael, an increase of 600,000 VND/tael for buying and 400,000 VND/tael for selling compared to the closing price of the previous trading session. The buying-selling spread of SJC gold is 2.3 million VND/tael.

At the same time, the world gold price traded on the Kitco exchange increased by $5/oz to reach $2,041.9/oz. The world gold price after conversion according to the exchange rate at Vietcombank: 1 USD = 24,590 VND, equivalent to 60.49 million VND/tael, which is 17.81 million VND/tael lower than the selling price of SJC gold.

According to figures just released by the General Statistics Office, the gold index for January 2024 increased by 2.55% compared to December 2023 and 15.43% compared to the same period last year.

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