November 2024 Gold Market Review: Election Impact, Central Bank Demand and Future Outlook

As of November 2024, the gold market is navigating a complex landscape shaped by geopolitical developments, fluctuating demand patterns, and speculative activity. The market has recently witnessed volatility, with gold reaching an all-time high of $2,790 per ounce in October before undergoing a correction following the U.S. Presidential election. This article delves into the factors driving gold's performance, including supply and demand dynamics, geopolitical influences, and macroeconomic trends, providing insights into the current market conditions and projections for the future.

Recent Price Movements and Market Dynamics

Gold surged to a record $2,790/oz at the end of October, fueled by investor sentiment and speculative demand. However, following the U.S. Presidential election, the price corrected sharply, dropping by 3.3% to $2,658/oz. This correction reflects heightened speculative activity, evidenced by increased demand in ETFs and futures, alongside broader inventory growth across the jewellery and bar sectors. The elevated prices have also encouraged increased mining activity and recycling, both of which are adding supply to the market.

Supply Trends: Mining and Recycling

The supply of gold has shown consistent growth, with mine output increasing 5.8% year-over-year in Q3. This rise was particularly significant in North America, where production in Canada and Mexico surged due to newly operational mining projects and a favourable comparison base from last year. Recycling has also remained robust, up 11.3% YoY in Q3, as high prices incentivize recycling activities globally. Total gold supply for 2024 is projected to reach 5,097 tonnes, a record level, although gains are expected to slow next year as price-driven recycling moderates.

Demand Patterns: Jewellery, Investment and Central Bank Holdings

• Jewellery and Investment Demand: Jewellery demand has weakened amid high prices, particularly in key markets like China, where consumption dropped by 33.5% YoY due to price pressures and economic conditions. Conversely, Indian demand for both jewellery and coins increased, spurred by a reduction in import tariffs. However, the overall demand for bar and coin softened by 8.9% YoY in Q3 as consumers show reluctance at elevated price levels.
• Central Banks and ETFs: Central bank demand has softened, declining 48.8% YoY as high prices deter purchases. However, there are notable exceptions, with central banks in Poland, Hungary, and India increasing their holdings. Gold-backed ETFs have seen a resurgence, with North American demand leading the inflow trend, totaling 94.6 tonnes in Q3, a stark contrast to the outflows recorded from 2021 to 2023.

Geopolitical Influence and Long-term Demand Outlook

The geopolitical environment is a major supportive factor for gold, with several global tensions likely to underpin demand:

• U.S. Foreign Policy Shifts: The incoming U.S. administration under President-elect Trump is expected to support policies that may escalate geopolitical tensions, including a stronger stance on Iran and renewed trade and currency disputes with China. These tensions could bolster central bank purchases as a hedge against instability.
• Ongoing Conflicts: The potential for prolonged conflict in Ukraine and continuing tensions in the Middle East are expected to sustain interest in gold as a safe-haven asset.

Future Projections and Market Risks

Looking ahead, several factors may influence gold’s price trajectory:

• Speculative Positioning Risks: The current high levels of speculative investment in gold-backed ETFs and futures create vulnerability to profit-taking and further corrections, especially if prices breach key support levels. A potential drop to the 200-day moving average near $2,383/oz is plausible if the market encounters sustained selling pressure.
• Inflation and Dollar Strength: Despite recent gains, the strength of the U.S. dollar and steady bond yields present a challenging environment for gold. However, inflationary pressures from anticipated fiscal policies in the U.S. may counterbalance some of these effects, sustaining long-term demand.
• Supply Constraints and Mining Costs: While supply is currently strong, the industry faces rising costs, with All-In Sustaining Costs (AISC) hitting a record $1,388/oz. Further, logistical challenges and regional supply disruptions could constrain output, providing a potential price floor for gold in the coming years.

Conclusion:

November 2024 finds the gold market at a pivotal point, with strong near-term supply and speculative demand countered by geopolitical and economic uncertainty. While the recent price correction reflects the speculative nature of recent gains, the metal remains supported by structural factors, including central bank buying, geopolitical tensions, and inflationary concerns. Future market stability will depend on the balance between speculative and long-term demand, dollar strength, and evolving supply dynamics, making gold a closely watched asset in the months ahead.