Speaking of record highs, gold has seen a historic jump in both demand and value this year, up more than 50 percent! Central banks have driven much of this surge, buying a record 634 tonnes of gold during the course of 2023. In the third quarter of the year, demand for gold shot up by 3 percent over last year. It hit an astounding 1,313 tonnes, the highest ever quarterly demand on record.
Gold hit a record high of almost $4,400 an ounce before dropping back under $4,000. So far, the market has reacted by helping gold prices maintain a consistent floor around this $4,000 threshold. Even with this consolidation, volatility continues to be a defining characteristic of the gold market, as demonstrated by average daily price swings of over $45.
Exchange-traded funds (ETFs) recorded inflows of 222 tonnes of gold during the just-completed third quarter. Demand for bars and coins increased as well, exceeding 300 tonnes over the same timeframe. All in all, these figures show the continued rise of gold as a safe haven and investment vehicle.
UBS analysts expect global demand for gold to reach a record-high 4,850 metric tons this year. This represents the highest point for gold demand since 2011. They ascribe this future jump-in to liquor consumption to continued buying by central banks. If private investors follow suit and begin replacing their U.S. Treasury holdings with gold, it can drive spot prices significantly higher.
“Coupled with still-elevated central bank purchases, global gold demand this year should, in our view, reach around 4,850 metric tons, the highest level since 2011. If private investors begin diversifying U.S. Treasury holdings into gold, which has been a trend among central banks, spot prices could be pushed even higher.” – UBS analysts
The Federal Reserve’s commitment to looser monetary policy may impact gold’s attractiveness as an investment. Some experts, including economist Larry Summers, don’t expect real interest rates to be a negative thing of the future. Such a change would lower the attractiveness of the U.S. dollar and push additional money into bullion.
For Sagar Khandelwal, a strategist at UBS Global Wealth Management, gold is a must-have ingredient for robust investment strategy. He demonstrated this focus even with the expected market turbulence to come.
“While the scale and speed of the gold rally may mean volatility could pick up from here, we maintain the view that gold is a valuable component of a resilient investment strategy.” – Sagar Khandelwal
What’s most remarkable about current conditions is the volatility in the gold market. These changes highlight the overwhelming demand for gold as a necessity asset in today’s economy. Market analysts point to future growth in gold investments as a sign of significant untapped demand yet to come.
“Nobody likes to go first — not in markets, not in start-ups, not in fashion. But once the ice breaks, the floodgates can open. This isn’t the avalanche. It’s a snowflake. But snowflakes can start a slide. Morgan Stanley broke the 60/40. Capital tilts toward gold.” – General statement
Despite the recent sell-offs, experts loudly spout that there is no fundamental reason for these downturns other than technical reasons.
“We like to buy the dip in gold.” – UBS analysts
Despite recent sell-offs, experts assert that there is no fundamental reason for such downturns outside of technical factors.
“Outside technical factors, we see no fundamental reason for the sell-off.” – UBS analysts