Global Head of the World Gold Council, Juan Carlos Artigas, has painted a ‘glittering’ picture of the performance of the gold sector in 2023 whilst asserting that the precious metal will also retain what he says is a “strong strategic advantage” in 2024. “Gold defied expectations in 2023,” Artigas asserted in his assessment of the performance of the sector, “outperforming commodities, fixed income and many global stock markets.” Artigas reports that the performance of the precious metal last year had “caught the world by surprise.” Prices he declared had reached all-time highs, topping out at over $2,100/oz in early December. The performance of gold last year, he added had “caused some market participants to predict that the only way is down.” However the World Gold Council boss says in his assessment that the outlook for this year will be more “nuanced” since it remains “anchored in many of the drivers of its positive performance in recent years as well as new, emerging risk factors.”
According to Artigas, the performance of the sector last year had been “unexpectedly positive compared to many other assets”. He declared that while there were many reasons for this, “The critical thing to note is that the majority of drivers are long-term trends and could positively impact the gold market for years to come.” And according to Artigas, the strength of gold as a store of value reposes in the fact that the commodity is “global” and that it benefits from diverse sources of demand. He said that gold’s unique characteristic of being both a consumer good and an investable asset means it performs well – in good and bad times. During periods of economic uncertainty, it is the counter-cyclical investment demand that drives the gold price up. During periods of economic expansion, the pro-cyclical consumer demand supports its performance, he declared.
In taking stock of 2023, Artigas declared that it had been a year characterized by uncertainty, This he said had been manifested in the fact that Central Banks had kept interest rates high in the battle against inflation, which he said is typically, “a headwind for gold.” Gold, he said, had outperformed many other assets – primarily on account of ‘Central Bank’s buying of gold, heightened geopolitical tensions around the world and, more recently, expectations of rate cuts in 2024.” And according to Artigas, probably the most talked about topic in the gold industry in 2023 had been “the significant step up in buying by Central Banks since the second half of 2022.”
He said that while the volumes of gold bought by Central Banks had reached new highs the trend is not new. “Central bankers have been net buyers of gold for nearly 14 years,” Artigas says, declaring that “having witnessed the global financial crisis, Central Banks are well aware of the positive effects of holding gold in their reserve portfolios through volatility and economic hardship.” “We know from our annual Central Bank survey that the top three factors driving reserve managers’ decision making are inflation concerns, interest rate levels and geopolitical risks. With that in mind, it comes as no surprise that Central Banks and other buyers turn to gold as a proven diversifier and hedge against the effects of inflation as well as a means to mitigate geopolitical uncertainty,” he declared, adding that it is estimated that Central Bank demand added 10% or more to gold’s performance in 2023. “Even if 2024 does not reach the same heights, above-trend buying should still offer an extra boost to the gold market,” Artigas says.
According to the World Gold Council official, what he describes as “the drumbeat of geopolitical risk” and “international trade tensions” have also contributed to a widespread appetite for gold. “With unresolved conflicts spilling into 2024 – it is likely that the geopolitical risk premium will remain in place for gold,” he added. Artigas asserts, meanwhile, that the economic and geopolitical risks aside, gold always has ready buyers, whether amongst institutional and retail investors, or the enormous international gold and jewelry market. “There are many known unknowns in 2024, but through good times and bad times, one portion of the market always finds a purpose and an attractive price for gold,” Artigas added.
