A report from the World Gold Council (WGC) reveals that people’s demand for gold reached a record high in 2023 as ongoing political tensions drove investors to seek safe-haven assets.
Record-high gold trading volume in 2023.
Total gold trading reached 4,899 tonnes last year, compared to only 4,741 tonnes in 2022. The transactions through retail counters and stock flows reflect the changes in the amount of gold being allocated throughout the past year.
Shaokai Fan, the Director of Central Bank Research at the WGC, said that the factors driving gold prices up in 2023 were the conflicts between Russia and Ukraine, Israel and Hamas, as well as the economic downturn in China.
“2023 is the second highest year in US central bank gold purchases ever, almost reaching the record high in 2022,” Shaokai Fan commented.
Gold prices reached an all-time high of $2,100 per ounce in December 2023 as central banks and retail investors increased their buying.
The report also shows that the People’s Bank of China is the largest gold buyer, with 225 tonnes purchased last year, raising reserves to 2,235 tonnes. Shaokai Fan evaluated that when the central bank starts to hold gold, the public also sees it as an attractive investment channel. In particular, the real estate crisis in China has prompted many investors to turn to gold.
“Chinese people are concerned about the future of other asset types and they are shifting to gold as a way to protect themselves. Gold has actually performed very well in this country,” Shaokai Fan said.
In addition, data from the WGC shows that China has overtaken India as the world’s largest consumer of gold jewelry in 2023. The country’s residents purchased 603 tonnes of gold jewelry last year, a 10% increase compared to the previous year. This comes from the continuous organization of weddings that were postponed due to the pandemic.
Chinese people are the largest consumers of gold jewelry in the world.
According to the WGC, gold buying this year is unlikely to reach the level of 2023. If inflation decreases, consumers may start to feel wealthier, reducing the demand for gold.
Currently, the Federal Reserve has a target of bringing inflation back to 2% without causing an economic recession. However, escalating political tensions during the important elections for many major economies, along with continued central bank purchases, keep the gold market vibrant.
Many WGC analysts evaluate that the soft landing of the US economy is uncertain when the global economic recession has not been resolved. This context encourages investors to hold effective risk-averse assets such as gold.
