In 2023, gold had a remarkable year with its price soaring above $2,000 per ounce and remaining at that level throughout the closing weeks of the year and into the first months of 2024. The Australian gold price also reached over $3,000 per ounce in late 2023 and has maintained this value, supported by the Australian dollar remaining under 67 US cents.
Several factors favored gold during the year, as noted in the World Gold Council’s (WGC) annual review. These included geopolitical events like the October 7 attack by Hamas on Israel, Israel’s counter assault on Gaza, and increased attacks on shipping in the Red Sea. Additionally, the ongoing conflict between Russia and Ukraine, a weaker Chinese economy, political tensions in the US, and fluctuating inflation amid high-interest rates from central banks played their part.
The primary influences on gold prices were the strong value of the US dollar and the level of US Treasury bond yields, particularly the key 10-year note, which peaked at 5% in late October but later dropped to under 4% by the end of the year, though it rose back above that level in early 2024.
Gold acted as a ‘safe haven’ asset, with the London gold price closing 2023 at $2,078.4 per ounce, marking a record year-end high and generating a 15% annual return. The average gold price for 2023 was $1,940.54 per ounce, also a record and 8% higher than in 2022.
Central banks played a crucial role in supporting gold prices by buying 1,037 tonnes of gold in 2023, nearly matching the 1,082 tonnes purchased in 2022.
Although gold demand in the fourth quarter of 2023 remained solid, reaching 1,150 tonnes and 8% above the five-year average, it was down 12% from the record 1,303 tonnes seen in the same quarter of 2022. This decline was primarily due to a 40% reduction in central bank buying, according to WGC data.
Gold ETFs experienced their third consecutive annual outflow in 2023, losing 244 tonnes, more than double the 110 tonnes lost in 2022. However, the pace of outflows slowed toward the end of the year, with significant outflows in September and October.
Despite the outflow from ETFs, Over The Counter (OTC) investment in gold contributed to its price strength throughout 2023, especially driven by increased demand for gold bars and coins from China, India, Turkey, and the US.
Annual bar and coin investment saw a mild contraction of 3% from 2022, as divergent trends in key Western and Eastern markets offset each other. European demand plummeted by 59%, but this decline was offset by a post-COVID recovery in China (up 28%), India (up 185 tonnes), Turkey (up 160 tonnes), and the US (up 113 tonnes).
Annual jewelry consumption remained steady at 2,093 tonnes, even in the context of the high gold prices, with China’s recovery in buying supporting the global demand.
In terms of supply, mine production remained relatively flat in 2023, increasing by an estimated 1% to around 3,644 tonnes. However, the final quarter saw a decline of 2%, equivalent to more than 16 tonnes. The full figures for supply will not be available until March.
In Australia, despite the rise in the Australian dollar price of gold by 13% in 2023, local gold consumption decreased by 34%. The WGC attributed this decline to the record-high gold prices, which dampened demand for jewelry by 6% and led to a 46% slump in demand for gold bars and coins in the country.
In summary, 2023 was a historic year for gold, marked by record prices, central bank support, and shifts in global demand and supply.