Commodity Focus By Kotak Securities

Gold climbed to a fresh record high, as
trade-war worries bolstered haven demand and there were
continued signs of short-term tightness in the market.
Bullion rallied as much as 1.2% to exceed $2,877 an ounce
on Wednesday. Prices have been supported by concerns about the
fallout of trade wars, particularly between the US and China.
Markets are also waiting to see if there are any ripple effects
for US monetary policy if tariffs reignite inflation.
There are indications of increased demand for gold as major
dealers seek to shift metal to the US before any tariffs are
imposed. One month so-called lease rates in London have jumped
to about 4.7%, far above previous levels of close to zero. The
rate reflects the return that holders of bullion in London’s
vaults can get by loaning their metal out to other buyers on a
short-term basis.
Bloomberg last week reported that the rush for gold has led
to weeks-long queues to withdraw bullion from the Bank of
England — where many central banks around the world hold
reserves — to deposit with private banks. Gold has also been
flowing into depositories of New York’s Comex exchange.
That has added to tightness in the market, according to
Rhona O’Connell, head of market analysis for EMEA and Asia at
StoneX Group Inc.
The typical 400-ounce bars that are traded in London aren’t
suited for the Comex market, where traders must deliver 100-
ounce or kilobars, but they can be refined in places like
Switzerland.
“Metal is still going into Comex warehouses and elsewhere
in the States,” said O’Connell. Authorities could possibly even
intervene by lending out gold if the situation became drastic
enough, she said. “If it gets much tighter or threatens to
become disorderly I would not be surprised if the official
sector injected liquidity, because one thing that central banks
won’t tolerate is a disorderly gold market.”
The dollar extended losses, following a US jobs report on
Tuesday that pointed to a gradual slowdown in the labor market.
A weaker greenback makes commodities like gold cheaper for most
buyers.
Read More: Trade War Reality Greets Chinese Traders on
Holiday Return
Spot gold gained 1% to $2,870.09 an ounce as of 12:32 p.m.
in London. The Bloomberg Dollar Spot Index was down 0.3%.
Silver, platinum and palladium rose.
(Bloomberg)

Gold Demand Hits Record High in 2024, Driven by Central Banks and Investors

Gold demand soared to an all-time high in 2024, fueled by aggressive central bank buying, resilient investment activity, and surging technological demand. However, high prices weighed on jewellery consumption.

For the third consecutive year, central banks purchased over 1,000 tonnes of gold, with Q4 witnessing a sharp acceleration in buying. Global gold ETFs, despite early outflows, rebounded strongly in the second half, contributing to the metal’s price rally.

Bar and coin investment remained steady, with Eastern markets capitalizing on rising prices, while Western investors engaged in profit-taking. Jewellery demand, however, declined by 11% due to record-high prices, although its total market value soared to $144 billion.

On the supply side, global gold production grew by 1% year-on-year, with both mining and recycling contributing to the rise. Preliminary estimates indicate mine production reached a record 4,974 tonnes, marking a historic peak in available supply.

With robust central bank acquisitions and strong investor interest, gold solidified its status as a premier safe-haven asset in 2024.

Looking ahead to 2025, central banks and ETF investors are expected to drive demand, supported by economic uncertainty and gold's role as a risk hedge. However, jewelry demand may remain under pressure.

World Gold Council

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