Global gold demand declined 5 per cent to 4,448.4 tonnes in 2023, compared to the previous year, mainly due to continuing Exchange-Traded Fund (ETF) outflows, according to the World Gold Council (WGC) report.
The overall global gold demand was 4,699 tonnes in 2022, according to WGC's Gold Demand Trends report 2023. According to the report, global gold ETFs saw a third consecutive annual outflow, losing 244.4 tonnes compared to 109.5 tonnes in 2022.
Losses were most marked in Europe, where holdings fell by 180 tonnes - the worst annual performance since 2013.
The pace of outflows slowed markedly into year-end, but October's hefty outflows dominated the fourth quarter (October-December), it added.
Outflows from European funds have continued in the opening weeks of 2024, and North American-listed funds have resumed their decline after a two-month respite in November and December, the report said.
Strong equity performance and continually shifting expectations surrounding the timing of rate cuts buy major central banks across the world could be the likely drivers for the outflows, it added.
Meanwhile, central bank buying was down 45 tonnes in 2023, at 1,037 tonnes compared to the previous year's 1,082. The central bank buying in 2023 was the second highest year on record, said the report.
In 2023, the People's Bank of China with 225 tonnes and the National Bank of Poland with 130 tonnes added the most to their reserves, while the Central Bank of Uzbekistan and the National Bank of Kazakhstan were the biggest sellers, the WGC report stated.
The report noted that the Central banks have been consistent net buyers on an annual basis since 2010, accumulating over 7,800 tonnes in that time, of which more than a quarter were bought in the last two years.
The Reserve Bank of India (RBI) added 16.2 tonnes of gold to its reserves in 2023 and 32 tonnes in 2022, the WGC data stated.
Turning to bar and coin investment, demand was subdued and down 3 per cent as strength in some markets worked to offset weakness elsewhere.
European demand continued to plummet, down 59 per cent year-on-year, the report said, adding that this decline was offset by a strong post-Covid recovery in China, where annual demand was up 28 per cent to 280 tonnes, combined with increases in India (185 tonnes), Turkey (160 tonnes), and the US (113 tonnes).
The global jewellery market proved to be remarkably resilient amidst record-high prices as demand inched up 3 tonnes year-on-year, with China playing an important role, recording a 17 per cent increase in demand for gold as it recovered from Covid-19 lockdowns, offsetting a 9 per cent decrease in India, said the WGC report.
"Unwavering demand from central banks has been supportive of gold demand again this year and helped offset weakness in other areas of the market, keeping 2023 demand well above the ten-year moving average. In addition to monetary policy, geopolitical uncertainty is often a key driver of gold demand, and in 2024, we expect this to have a pronounced impact on the market," WGC Senior Markets Analyst Louise Street commented.
Ongoing conflicts, trade tensions, and over 60 elections taking place around the world are likely to encourage investors to turn to gold for its proven track record as a safe haven asset, she said.
"We know that central banks often cite gold's performance in times of crisis as a reason to buy, which suggests demand from this sector will stay high this year and may help to offset a slowdown in consumer demand due to elevated gold prices and slowing economic growth," she added.