Gold surges 12% YTD, outperforms major asset classes: WGC

The surge was driven by ongoing central bank buying, robust Asian investment flows, resilient consumer demand, and persistent geopolitical uncertainties.

New Delhi: Exhibiting remarkable performance, gold rose by 12 per cent year-to-date, outpacing most major asset classes, the World Gold Council said in its Gold Mid-Year Outlook 2024.

It noted that the surge has been driven by continued central bank buying, robust Asian investment flows, resilient consumer demand, and ongoing geopolitical uncertainties.

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Looking ahead, the report adds that investors are keenly watching the gold’s momentum in the market.

“With global economic growth indicators wavering and a market eager for rate cuts amid persistent but lower inflation, the current gold price appears to reflect consensus expectations,” the report added.

The report emphasises that Asian investors have significantly influenced gold’s recent performance. This influence is apparent through their demand for gold bars and coins, gold ETF flows, and activity in the over-the-counter market. Traditionally, Asian investors bought gold during price dips, but lately, they have been following market trends, it said.

The gold council noted a substantial growth in the assets under the management (AUM) of Indian and Chinese gold ETFs.

It further highlighted that the global economy and gold appear to be awaiting a catalyst. “Like the global economy, gold appears to be waiting for a catalyst. This may come in the form of Western investment flows as interest rates fall or risk metrics increase. And while its outlook is not without challenges, there is growing appetite for gold in asset allocation strategies,” the report added.

Highlighting the likely negative impact on gold, it added that a substantial decrease in central bank demand or widespread profit-taking by Asian investors could impact its performance.
“Despite these potential challenges, global investors are still benefiting from gold’s role in robust asset allocation strategies,” it added.

Juan Carlos Artigas, Global Head of Research, World Gold Council said, “As we approach the back half of 2024, with the global economy in a transitional state, investors want to know whether gold’s momentum can continue, or if it is running out of steam. The market used to focus solely on interest rates and the US dollar to inform their perception of gold. Through that lens, developments during the past six months should have significantly dented gold’s performance – and yet we’ve had record highs and strong performance throughout Q2.”

Mentioning the effect of a sharp increase in the price of gold, the report added that gold prices have reduced demand in markets like India and China, though positive economic growth can mitigate this effect.

Stable gold prices can attract buyers who are more worried about price swings than high prices. This is especially true in India, where people expect the economy to grow and see gold as a safe investment, the report added.