Driven by central bank buying and geopolitical tensions, gold reached a new high of $2,135.4 per ounce in 2023. With an annual return of 15% and an average price of 8% above the previous year, also a record.

Data from the annual report of the World Gold Council (WGC) show that gold had a fantastic year in 2023. Especially in December when, thanks to the fall in value of the US dollar and the possible interest rate cut by the Federal Reserve, it reached a new record high of 2,135.4 dollars per ounce on 4 December.

It has also maintained an average price of 8% higher than during 2022, achieving an annual return of 15%, well above other low-risk savings or investment options such as time deposits or Treasury bills. More importantly, more than offsetting Spain’s 3.1% headline and 3.7% core inflation in 2023.

Although central bank purchases of gold continued the 2022 trend at “a breakneck pace”, demand from this sector stood at 1,037.4 tonnes of net purchases in 2023, some 45 tonnes (4%) less than the record year of 2022, the WGC notes in its report.

Still, it should be noted that more than half of the central banks’ purchases were attributed to unknown buyers. Unlike many central banks that report their gold purchases to the IMF every quarter, central banks in China, Russia and other countries buy and store gold without declaring it as reserves, thus concealing the true volume of purchases.

On the other hand, Chinese households and investors have been buying gold to protect their savings when faced with the housing market crisis and the chaos in the local stock market sector, which has helped sustain record prices for this safe-haven asset. Ergo, it is not surprising that, according to the WGC report, China has emerged on the global stage as a key country in the rise of gold investment and jewellery flows in 2023.

Geopolitical conflicts and trade tensions to sustain demand

WGC analysts see total gold investment (including OTC) likely to increase during 2024, following the trend and market behaviour seen in 2023. Central banks are expected to continue buying gold “at an impressive pace”, probably above the pre-2022 annual average of around 500 tonnes.

This forecast is in line with a Reuters survey of 30 analysts and market participants, according to which the price of gold will rise during 2024 from this year’s average. Specifically, they forecast an average of $1,986.5 per ounce in 2024, up from this year’s average of $1,925. This is based on the assumption that global central banks will begin to loosen monetary policy and the fact that tensions in the Middle East will continue to drive gold as a haven for investors.

In conclusion, it seems that generally speaking, the investment trend towards gold at the expense of fiat money will continue. Runaway public debt, especially in the Western world, and rising global geopolitical tensions, suggest that gold will continue to be the ultimate safe-haven asset when facing economic uncertainty.

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