On global gold demand outlook and central bank purchases
Globally, in 2024, I expect a number of things to repeat themselves from last year. First, I expect the central banks, especially those in the less developed countries, to continue to buy gold to re-adjust their reserves. They do understand now the value of having gold as a cornerstone of those reserves. Also, statistically the share of gold in their reserves is still lower than the western central banks. (So, there is a greater scope for further purchases)
Second, I think the persisting geopolitical tensions will support the gold market. One key driver that will support gold is the burgeoning debt levels. We are all familiar with the US debt ceiling; I expect heightened focus on the elevated debt in Europe. As a consequence of these, I expect gold to stay as an alternative (asset class) in the investors’ mind. Inflation, too, remains sticky in many countries.
Another thing that’s going to drive gold demand is education and awareness. People, especially youth, are increasingly looking for alternatives to currencies that are essentially depreciating day after day, especially as more and more of them are being printed. And as a consequence, I think the younger generation are going to come in and see gold as a worthwhile viable alternative asset class.
(Global gold demand, excluding over-the-counter trading, eased 5% to 4,448.4 metric tonnes in 2023 but still remained robust vis-à-vis a 10-year average.)
On gold demand in India in 2024
We saw that jewellery demand in India declined in 2023 (by 6% from the 2022 level). But (investment) demand for bars and coins picked up (7%). So, it was a notable switch. The rise in gold prices may have deterred some people from buying jewellery but the investment demand went up. I expect demand for bars and coins to do particularly well in 2024. It must have been a reflection of the geopolitical situation that is spurring people to do this. I think more educated young people are coming online and looking for gold in a slightly different way. So, I expect both global and Indian demand to go up in 2024.
On gold price trajectory in 2024
It would be hard to imagine a situation where the gold price doesn’t continue to creep up. We haven’t seen a big jump in the gold price but at the same time I think a lot of central banks don’t chase the gold price (while purchasing the precious metal for reserves). I think most long-term investors don’t chase prices. So, I expect this slow trend of increase to continue until something truly fundamental changes in the world.(Gold prices scaled a peak of $2,135.4 per troy ounce in December 2023 before pulling back. Still, they have held above the psychological $2,000 level this year.)
On India’s sovereign gold bonds vs physical gold
The sovereign gold bond offers choices to investors to invest (in “paper gold”). You get a certain yield from it as well. I don’t see why that would be a negative for the gold market as a whole. I think it’s encouraging people to see gold’s value as an investment commodity and a stabilizer to their household or institutional income. So no, I don’t see it as a threat (to the physical gold trade). I would be very surprised if it grew to such an extent to be a threat.
(India intends to float sovereign gold bonds worth Rs 29,638 crore in FY25, a jump of over 10% from FY24. At Thursday’s price, it would be equal to about 48 tonnes.)
Bridging consumer trust deficit in gold purchases
We’re doing an awful lot on this front. We set up, to begin with, retail gold investment principles, a set of principles the industry should adhere to. And once accredited, jewellers can advertise that accreditation, the fact that they are living up to these standards. At the same time, we set up a retail gold and investment guidance for people to understand the difference between the jewellers who adhere to these principles and those who don’t. So, when they walk up to a store, they can make their own choices. These are being rolled out globally–in Singapore, Germany, the US. In India, it culminated in a Self-Regulatory Organization (SRO), which will be funded by us for the first few years. And we’re hoping that the industry adopts this and takes it on at some point (when) it becomes self-sustaining in 3-5 years. The SRO will have a chairman, CEO, salaried people and proper infrastructure. It will work with the rest of the gold industry to improve the trust and transparency and bridge the educational deficit.
We have been working with the India International Bullion Exchange very closely. And we are big supporters of that initiative and at some point, it should be mandated that all gold come into the country through that platform. I think that would be a great step in the right direction for the world to perceive India as a gold hub. And it will also lead to greater transparency.
We are also advertising the power of gold in one’s portfolio (through multi-media campaigns). Our campaign goal is to make sure that people, especially the youth, understand gold as an asset class, which is not just jewellery but well beyond that. So, raising the trust and understanding levels is exactly what we are focused on.
On global gold production outlook
It was a record year last year (for gold output) and I believe it will stay around that level (in 2024). I think we have some milestones this year which will be very important. We want to ensure our miners adhere to the responsible goal mining principles. We also have some very, very important stuff going on with regard to the Gold Bar Integrity Programme which we have launched and which aims to digitally monitor gold moving through the global supply chain (by confirming provenance and providing transparency over the chain of custody). We worked with the LBMA to set this up last year. It’s up and running and all our miners have agreed to come on to the system. This means all refiners will go into the system, all the logistics regarding the system, or retail eventually will go into the system. Recently JP Morgan and HSBC agreed to come on to the system as well. In addition, our members have also agreed to disclose all their refining partners to try and be more transparent about the manner in which the industry works.
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