Thais undeterred by record gold prices, demand remains strong

The report, released on Wednesday, shows that Thailand's demand for gold bar and coin investment increased by 10% year on year to 5.9 tonnes compared with the same period in 2023. Thailand's total consumer demand increased by 4% year on year, despite record high prices.

Thai gold prices rose higher than international rates thanks to the baht's continued depreciation in the first quarter of this year.

Meanwhile, total gold demand globally, including over-the-counter purchases, increased 3% year on year to 1,238 tonnes, the strongest first quarter since 2016. 

Global demand, excluding over the counter, fell 5% year on year to 1,102 tonnes in the first quarter of 2024.

Shaokai Fan, the WGC's head for Asia-Pacific (ex-China) and global head for central banks, stated that despite gold prices reaching all-time highs in the first quarter of 2024, which impacted the gold-jewellery market, total consumer demand in Thailand increased. 

"We saw a drop in demand for gold jewellery in Thailand as prices began to rise in March. This also resulted in a significant increase in recycling activity," he explained. 

According to the report, global jewellery demand remained resilient despite record-high prices, falling only 2% year over year. Demand in Asia offset declines in both Europe and North America. 

Thailand, Vietnam and Indonesia all experienced similar year-on-year declines in jewellery demand, with Thailand down 10% to 1.9 tonnes, Vietnam down 10% to 4.1 tonnes, and Indonesia down 12% to 5.5 tonnes. 

This decrease is due to the gold-price rally in late Q1, which choked off regional demand. 

Louise Street, WGC senior markets analyst, noted that the gold price has risen to all-time highs since March, despite traditional headwinds such as a strong US dollar and interest rates that are proving to be “higher for longer”. 

She explained that the recent surge is due to a combination of factors, including increased geopolitical risk and ongoing macroeconomic uncertainty, which are driving safe-haven demand for gold. Furthermore, continued and resolute demand from central banks, strong over-the-counter investment, and increased net buying in the derivatives market have all contributed to gold's rising price.

"Interestingly, we are witnessing shifting behaviour trends among Eastern and Western investors. Typically, investors in Eastern markets are more price-sensitive, waiting for a dip to buy, whereas Western investors have historically been drawn to rising prices, tending to buy into the rally,” Street said. 
"In the first quarter, we saw these roles reversed, with investment demand in markets such as China and India increasing significantly as the gold price rose.” 

According to the WGC's most recent report, the increase in global gold demand was driven primarily by healthy investment from the over-the-counter market, persistent central-bank buying, and increased demand from Asian buyers. This helped drive gold prices to a record quarterly average of US$2,070 per ounce, which is 10% higher year on year and 5% higher quarter on quarter.

Meanwhile, central banks worldwide continued to buy gold at a rapid pace, adding 290 tonnes to official global holdings during the quarter. Consistent and substantial purchases by the official sector highlight gold's importance in international reserve portfolios in the face of market volatility and risk exposure.

In terms of investment demand, the report shows that global bar and coin investment increased 3% year on year, remaining at the same high level as in the fourth quarter of 2023 (312 tonnes). 

Gold exchange traded funds (ETFs) continued to see outflows, with global holdings falling by 114 tonnes, led by North American and European funds but partially offset by inflows into Asian-listed products. 

The majority of that increase came from China, where investors renewed their interest in gold as the local currency weakened and domestic equity markets performed poorly.

Furthermore, demand for gold in technology increased 10% year on year, owing to the AI (artificial intelligence) boom in the electronics industry.

On the supply side, mine production rose 4% year on year to 893 tonnes. The amount represents a record first quarter. Recycling also reached its highest level since the third quarter of 2020, up 12% year on year to 351 tonnes, as some investors viewed the high price as an opportunity to profit.

Looking ahead, Street estimated that 2024 will produce a much higher return for gold than expected at the start of the year, based on its recent performance. 

If the price level falls in the coming months, some price-sensitive buyers may return to the market, and investors will continue to look to gold as a safe haven asset as they await the outcome of rate cuts and elections.