Wealthy individuals and family offices were the primary drivers behind a record second quarter for gold demand, according to a World Gold Council report. These rich investors, particularly concerned about burgeoning US government debt levels, led to a surge in opaque private purchases of the haven asset, reaching 329 tonnes in the three months to June—nearly five times higher than the previous quarter. This buying contributed to lifting total gold demand to 1,258 tonnes in the quarter, the highest April-to-June period since 2000, and a 4% increase year-on-year.
The gold price hit a record high of $2,483.60 per troy ounce earlier this month, driven by expectations of interest rate cuts, which benefit non-yielding assets like gold, and uncertainty surrounding the US presidential election. The metal is currently trading around $2,380 per troy ounce. John Reade, chief market strategist at the WGC, noted anecdotal evidence suggesting wealthy US family offices were buying heavily due to fears over uncontrolled fiscal deficits. He also reported strong activity from wealthy Asians in Singapore and Hong Kong, as well as rich Turks converting wealth to gold amidst the lira's devaluation.
This buying spree by wealthy individuals coincided with a positive shift in gold-backed exchange-traded fund flows, which saw five consecutive weeks of inflows totaling 39 tonnes in June and July, signaling Western investors are finally joining the rally after two years of consistent selling. While central bank net purchases, which had previously boosted gold prices by a third since early 2022, reached a record 483 tonnes in the first half of the year, they saw a 39% drop between the first and second quarters, potentially preventing them from exceeding 1,000 tonnes this year. Chinese consumers and investors, who fueled gold's surge earlier in the year, have started to slow their buying, and purchases of gold jewelry also declined by 19% to 390 tonnes in the second quarter due to higher prices.
