Gold news

 [Music] I'm Charlotte McLoud with investing news.com and here today with me is Joe katoni market strategist Americas at theor Gold Council thank you so much for being here great to have you great to be back Charlotte thank you really good to be checking in with you today the world gold Council has just released its latest gold demand Trends report so I thought we could start by taking a highlevel look at demand in 2023 for gold perhaps comparing back to previous years and I know we have numbers for

demand including OTC and excluding so I wondered if you could just give us some general context there absolutely I think everyone started 2023 expecting a world of rate cuts it didn't happen I think every everyone was expecting not a lot from gold I think geopolitical systemic issues supported the price as a consequence of everything that played out over the course of 2023 record setting year in terms of total demand tracked by the world gold Council of 4,899 tons and that includes the OTC number now that large OTC number which

has been one of the largest numbers we've seen in a while gold trades as an OTC asset not on an exchange some instruments do but the large volume of gold trades over the counter and sometimes those consumers are not as easy for us to nail down or put um into a category that is commonly tracked whether it's jewelry or central banks or exchange traded funds but we are confident in the number we actually feel good about that number it's a large number but it's pockets of investment

whether it's Sovereign wealth funds or maybe High net worth individuals or family offices we've heard anecdotally those are the types of people that have been consuming gold in large ways and that's likely to be the type of people that are making up that number but again record setting year in terms of our overall demand and actually surprising again to the upside in terms of performance for 2023 okay good to go over that to begin with and as I mentioned there's lots of points that we want to follow up on and

I think the first path that I want to go down is Central Bank buying because all through 2023 I was hearing how strong it was how much they seemed to be buying so good to look back and see what the actual number came in at and also to learn which central banks were Stand Out buyers this past year that's right I think again we started that this is a 14-year Trend now uh so again net buying by Central Banks net on the on the on a 14year trajectory 2022 was a record- setting year just over 1,100 tons we

were close to that I should say it's about 1,85 tons in 2022 we were close to that record again in 2023 at 137 tons so about 45 tons away from another record year you might remember in September of 2023 we were on track to hit a new record at 800 tons in the Central Banking Community but that number again very strong in 2023 and those banks that continue to be the largest consumers of gold in the reserve portfolios and disclosing those Holdings include the Emerging Market central banks China

Poland uh turkey you see this uh pretty widespread in the Emerging Market Central Bank so those are the big buyers those are the big names that continue to be strong supporters of the gold market yeah really interesting to see so almost at that record 2022 level very exciting and I'm going to ask just a small follow-up question there on China because I know that people always ask about this when they see it mentioned so China emerged as the the largest Central Bank buyer of gold in 2023 I think

people always wonder though you know about the accuracy of the numbers coming out of China so any thoughts that you would share there for invest rers well I think the thing that people need to have an appreciation for is with our partners that help us to accumulate and put together our reports we go through a rather thorough and uh comprehensive um exercise to get the data validated and we rely on IMF reporting which China aderes to uh and when they have these validated numbers come forward we use

those to give our information to people and where we are concerned or questioning accuracy of certain numbers we will air on the side of conservatism and not to forget one thing on an annual basis we do survey different central banks maybe 60 this year that we'll have and that survey will come out in May so if you want more information around their mindset and their aspects of how they're looking in holding gold um so again validated data through normal and and confirmed channels but also uh you

know qualified and and and and validated further with our survey report that comes out every may very good okay thank you for going over that and of course I think what people are going to be wondering now is after this year of high Central Bank buying in 2023 what is 2024 looking like it's going to shape up for Central Bank buying of gold I think the Central Bank case for the central banks to continue to add gold to their portfolio in particular the Emerging Market central banks that have large dollar and Euro

exposure continues to be a strong case like we felt last year we don't know exactly how much capacity they will continue to have to make the Investments so we'll see how that works out over the course of 24 but again the rationalization whether it is a looking and feel around how they want to manage their dollar-based exposure or dollar-based assets dealing with their own homegrown inflationary concerns and challenges maybe geopolitical risks that are also weighing in on their decision that need for liquidity in their

portfolios and even the concern that some might even have around the uh increasing level of potential for sanctions to impact their overall position those are all factors that are going to continue to strongly support the case for central banks to be buying remember the Central Banking buying has been something that has been a very strong support for the gold price on the downside so while we haven't had as much of a breakout moment as we'd like even though we did hit a record level for

lbma fix during the course of 2023 we're we're we're we're very comfortable and very happy with the fact that the theand that comes from central banks is supporting us on the Downs right and one more point on Central Bank buying of gold just because it's been so top of mind I think for investors this past year there's of course so many factors that impact the gold price but I've heard frequently mentioned that it's the Central Bank buying that has really acted to support

the metal do you have that sense as well in terms of price support yeah as I've just indicated we we know that central banks are active we know that they have buying program that are sophisticated and robust and um we often um get confirmation through validation that they put out in terms of their own reporting that they've been buyers when prices start to dip so we we again feel that that they're going to be a large component of what's going to play out in terms of the overall consumption and

again this is not something that's just last year 2022 this is again a net a net trend for 14 years so we've been seeing this for quite some time yeah you know I'm so focused on this immediate report but it's good to remember looking back quite a long time this is a theme so really good to go over that okay so getting away from central banks of course their buying was strong in 2023 but over on the investment side it fell to a 10year low this past year and I believe that's largely due to ETF outflows also a

little bit lower in terms of the bar and coin demand so let's look over at that and and maybe what that means in terms of retail invest demand for gold right so I think the story in exchange traded fund land is that it's a a a small component of the overall gold market but a really good transparent component of the overall gold market and it does give you a sentiment of how people are looking at asset allocation in their portfolios but it is not the only component that makes up gold as investment so you pointed out bars and

coins and we'll talk on that for a moment but the story is investments in exchange traded funds has been outflows both in Europe and the US the two largest markets by far terms of overall demand for gold and and actually what we saw in the tail end of 2023 for the ETF Market in the US was that expectation that maybe the ray cuts that could be coming in 24 potentially developing and ultimately um we started to see the pace with which outflows and maybe even some turning into an inflow Market uh taking

place in the the US the European market still a larger flow of outflows in terms of overall Activity one last point on exchange traded funds the Asian market India China are the two largest markets that have exchange traded funds outside of the European and the Americas um they had inflows over the course of years small relative to the other markets now bars and coins actually very interesting because that's a very unique story that's developing differently in different parts of the world China India

strong performance there you see maybe a drift away from jewelry as a consumable asset and more into investment Savings in those markets which has been a strong story for 2023 lots of reasons why that might play out in China in terms of the overall state of the economy the strength or weakness I should say the remm flipping to the Western markets Germany really disappointing year in terms of the overall flows down 75% in terms of the overall demand levels that we were expected to see but in the US

quite a surprise to the upside so you hear a lot of people talking to the fact that ETFs and demand is down for gold in the investment space but the exception is that pocket of 113 tons of uh demand that came in the form of bars and coins so maybe it's really truly retail that's buying you there's a big story about uh gold getting consumed to through Costco and I think that that kind of gives us a little bit of a signal that hey look there are people that are still putting savings and money in that form of

investment to work in the gold market it shows in terms of bars and coins but again the inst tional and the more um um institutional minded kind of flows in the ETF space they're definitely moving around trying to figure out where opportunity cost in to land right and just as you pull out those different statistics in terms of different regions you know we often hear about the East West divide in terms of good demand really at all levels but it sounds like that's maybe not quite as concrete as it always is is there

anything you would add there I think it's probably one of the most interesting Dynamics dyamics to play out in 2024 personally I think what I think what I find most interesting will be to see how China develops in particular in that investment landscape and how the overall opportunity for us to see where rates move in 2024 particularly out of the fed's monetary policy and see what happens with Western demand for investment so really interesting Dynamic um and again I'm really excited over the

fact that China and India both have developing financial markets that have gold wrapped in exchange traded funds but also that very robust or coin market so as we look forward to 20124 in terms of gold demand what is the overall Outlook what are you expecting to see this coming 12 months I think a lot still hinges upon what happens with monetary policy mainly the us but also other major markets around the world we're also keeping very close eye on what develops out of Europe which is somewhat behind in terms of the cycle of

where they are in terms of managing the concerns of inflation so we'll see when and how the FED deals with where rates are and that rate cycle that's going to give us that breakout right now I think we're going to see the strong demand from these Pockets that we've talked to continue to be there that'll give us a support to the downside but you could very simply see you know another strong performance like we saw in 2023 based on how monetary policy develops with that comes a very very

strong case for the systemic risks the event risk and the hedging risks that come along with a very very uh volatile geopolitical landscape getting more complicated as we speak in terms of flareups in the Middle East still an ongoing concern in in Eastern Europe uh and then also you know the sin us relations and how they'll develop just had a Taiwan election the outcomes very interesting to see how that plays out we've got a lot of Elections taking place in particular in the US so you've

got these strategic case to be made this strategic case to be made in terms of when and how monetary policy develops but also you've got this tactical moving market in terms of geopolitical and political events that could keep gold very top of Mind as a safe haven Hedge for people so a big strong case for gold into 2024 and we'll see how it plays out definitely I think these are certainly topics that hopefully we can check in with you on as the year progresses and I know I know the report

is the gold demand Trend report but I want to check in on Supply just briefly I know it's perhaps a little bit less exciting but I think we had supply for 2023 up 3% from the previous year M Supply 1% so if we could just take a look at those numbers and if you expect to see significant changes there in 2024 or or kind of more the same I think the things to keep an eye on with mine Supply is that the development in the mining space itself is a steady slow ongoing increase but that'll be more uh

of a more muted growth rate in terms of what you would see potentially would come in the form of recycl so recycling when prices are high will bring out gold and that will actually become a largest source for the demand or for the supply side to take into place and that's what you kind of saw in 2023 which was a 9% increase year on-year again supported by a strong price so that jewelry that's laying in your drawer might come out and get recycled that that that that old stock of gold that

might be sitting in the diary might come out and get recycled so those are the types of trends that we see so we'll keep an eye on markets like India and parts of Asia where recycling is a big component of what we see um but I think if we see higher prices we'll probably see a little bit more on the recycling side but again on the mining side steady as it goes and just one more note on the supply side when it comes to the miners it looks like we might be seeing a trend of their costs starting to I'm not sure

if it's come down or at least grow a little bit less but that that seems promising if we are going into an uh an environment of higher prices so anything you would add there yeah look the way to understand all in sustainable cost like every organization that's subject to the broader economic environment the mining companies are going to be subject to higher prices when it comes to the price of fuel or energy to actually run their operations I think that we're still well above their o and sustainable costs

which gives is a good thing for things but also have you know ongoing um op operations that they need to work with Staffing but they also have environmental issues that they need to be tackling so lots of factors that weigh in on that Allin sustainable cost but again manageable the other thing is that in an increased rate environment they might be feeling a little bit more on the cost of capital as it relates to the funding so I think it's manageable I don't think it's going to be um um

anything that's going to be disruptive to the space in any way and like you said I think the pace with which it's grown has come off a bit bit so maybe rate coming off rates coming off maybe the cost of inflation coming off a bit will do us um a good thing for the all and sustainable cost all right and and as we finish up I know the report is filled with different statistics and takeaways that I'm sure everyone should should take some time to peruse is there anything else that you would pull out for investors that you

think is really important to pay attention to I think I think the the key factor would be don't don't let just you can hear see and easily you ascertained in the ETF Market give you the full picture on the demand from investment and second I think that in an environment where we have pressure from a rate environment and an opportunity cost that's putting headwinds on gold you know because of these diverse different ways that gold gets consumed you can see 2023 is a very strong case for why you have to look deeper than the

surface for this asset to understand how it gets you know how its price performance will play out over the course of any period of time demand from these different sources including technology which we didn't touch upon but look it fell a bit in terms of tech um but it's still a key component that makes up that broad Universe of demand so I'd say dig below the surface and understand the real drivers and it's all very clearly easily understood in the rep very good thank you so much dig

below the surface I feel like there's a pun in there but I don't know if I can pull it out thank you so much for for coming on to go over what's in the report will include a link in the video description for people to check it out if they would like to and hope to check in with you again soon as 2024 goes on thanks of course and once again I'm Charlotte McLoud with investing news.com and this is Joe katoni with the world gold Council thank you for watching if you like this video make sure you subscribe

to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next time [Music]