LONDON Global gold demand rose by 3% year-on-year to 1,238 metric tonnes in the first quarter of 2024, marking the strongest first quarter since 2016, due to active over-the-counter (OTC) trading, the World Gold Council (WGC) said on Tuesday.

Safe-haven demand, driven by geopolitical and economic uncertainty, investment in the OTC market, persistent central bank buying, and high demand from Asian buyers caused a rally in gold in March-April, pushing the first-quarter gold price to a record average of US$2,070 per ounce.

Demand, excluding OTC, fell 5% to 1,102 tonnes in the first quarter as jewellery consumption lost 2% and physically-backed gold exchange traded funds (ETFs) experienced outflows - of 114 tonnes, according to the WGC, an industry body whose members are global gold miners.

Global central banks, which actively bought gold in 2022-2023, added 290 tonnes to their reserves, up 1% year-on-year and up 69% from the five-year quarterly average.

It was their strongest starting quarter to any year on the basis of WGC's data going back to 2000. The central banks of China and India led.

WGC expects 2024 central banks to slow purchases slightly compared to last year's 1,037.4 tonnes, but that they will remain higher than they were before 2022, Krishan Gopaul, WGC senior EMEA analyst, told Reuters.

"Although the buying momentum from central banks continues, we are taking a cautious look ahead - waiting to see if the recent gold price growth prompts some central banks to slow down purchases or some to sell part of their holdings," Gopaul added.     

Bar and coin investment, another major sector for gold consumption, rose 3% to 312 tonnes in the first quarter due to high demand for small gold bars in Asia. In China, bar and coin demand jumped by 68% to 110 tonnes, the strongest in more than seven years.

Physical demand in Asia, traditionally a region of price-sensitive investors, rose in the first quarter despite high prices, marking a shift in behaviour trends, the WGC said.

On the supply side, mine production increased by 4% to 893 tonnes, its record for the first quarter, while recycling rose by 12% to 351 tonnes, reaching the highest since the third quarter of 2020, as some holders of old gold jewellery saw an opportunity to cash in on higher prices.

Gold's April price growth may prompt a further rise in recycling and a fall in jewellery demand, but elevated geopolitical risk and the quasi-investment role of jewellery in some countries would limit the impact, the WGC said.

  - Reuters