Gold had a remarkable year in 2023, 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. This surge in gold prices was fueled by several factors, including geopolitical events, conflicts between countries, a weaker Chinese economy, political tensions in the US, and fluctuating inflation amid high interest rates from central banks.

The strong value of the US dollar and the level of US Treasury bond yields were primary influences on gold prices. These factors made gold an attractive investment option and a safe-haven asset. The London gold price closed 2023 at $2,078.4 per ounce, marking a record year-end high and generating a 15% annual return.

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 the previous year. This increased demand from central banks helped to bolster the price of gold.

Gold ETFs, on the other hand, experienced their third consecutive annual outflow in 2023, losing 244 tonnes. However, the pace of outflows slowed toward the end of the year. Despite this, gold bars and coins saw increased investment, particularly in Over Counter (OTC) transactions. Demand for gold bars and coins was driven by China, India, Turkey, and the US.

Annual bar and coin investment saw a mild contraction of 3% from 2022. European demand for gold plummeted, but this decline was offset by recovery in China, India, Turkey, and the US. Jewellery consumption remained steady at 2,093 tonnes, with China’s recovery in buying supporting 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%. Australia, despite the rise in the Australian dollar price of gold by 13% in 2023, experienced a significant decrease in local gold consumption by 34% due to record-high gold prices.

The World Gold Council’s (WGC) annual review highlighted the impact of geopolitical events on gold prices, stating, “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.” Gold acted as a ‘safe-haven’ asset during these uncertain times, attracting investors seeking stability and protection for their wealth.

The WGC also mentioned the stability of gold mine production, stating, “In terms of supply, mine production remained relatively flat in 2023, increasing by an estimated 1% to around 3,644 tonnes.” Despite fluctuations in demand and price, gold mining operations maintained a consistent level of output.

The review also highlighted the decline in gold consumption in Australia, stating, “Despite the rise in the Australian dollar price of gold by 13% in 2023, local gold consumption decreased by 34%.” The high gold prices deterred local consumption, causing a significant drop in demand within the country.

In conclusion, gold had an exceptional year in 2023, with its price soaring to new heights and remaining strong throughout the year. Geopolitical events, central bank purchases, and increased demand from countries like China, India, Turkey, and the US contributed to the robust performance of gold.

Despite some challenges, such as the outflows from gold ETFs and the decline in Australian consumption, gold proved its status as a safe-haven asset and maintained its position as a valuable investment option.