How Tech Is Keeping the Gold Market Shining Amid Jewellery Market Slowdown
The global gold market saw some interesting twists in the second quarter of 2024. With gold prices hitting record highs, different sectors reacted in unique ways. While the jewellery market struggled under the weight of soaring prices, tech came to the rescue, offering a bright spot for gold dealers and the industry as a whole.
Gold dealers, particularly those in the over-the-counter (OTC) market, have played a key role in keeping prices elevated. According to the World Gold Council, the surge in gold prices has been making waves, largely fuelled by strong demand from central banks and gold buyers in the OTC market. These gold buyers—ranging from institutional investors to high-net-worth individuals and family offices—are increasingly turning to gold to diversify their portfolios
However, the jewellery sector—a traditional powerhouse for gold demand—saw a significant drop during the second quarter of 2024, largely due to unprecedented price spikes. In major markets like China and India, consumers became more cautious, leading to a noticeable decline in jewellery purchases.
For gold dealers in China, the demand for gold jewellery fell by 35% year-over-year, making it the weakest second quarter since 2009. Consumer confidence was weakened by the combination of rising gold prices and a faltering domestic economy, which decreased their desire for gold.
India saw a similar trend, with jewellery demand dropping 17% year-over-year, reaching its lowest level since the COVID-19 pandemic in 2021.
Tech Takes the Lead
While the jewellery market struggled, the technology sector provided a much-needed boost for gold dealers. The growing use of gold in high-end chips for artificial intelligence (AI) and high-performance computing led to an 11% increase in gold used for industrial purposes in the second-quarter of 2024. Electronics, in particular, saw a 14% rise in gold demand compared to last year.
For gold dealers in the tech industry, this demand surge is a clear indication of the critical role of precious metals in the future of technology. Leading chip makers revealed robust demand and profitable outcomes, with a large portion of their manufacturing of high-end memory chips already scheduled for 2024 and 2025. The demand for gold is anticipated to continue being driven by the ongoing AI boom and the growing uses of high-performance computing.
Despite the challenges faced by the jewellery sector, the tech and investment sectors have helped balance the market. The quantity of gold in circulation rose by 4% annually to 1,258 tons, as mine output achieved a record-breaking level in the second quarter. Central banks continued to be major purchasers of gold due to worries about portfolio diversification and geopolitical risk mitigation.
The crucial question as we move into the future is: What will motivate gold dealers to remain active in the market? Several factors suggest that their interest will remain strong. Ongoing economic uncertainty and geopolitical tensions typically steer investors towards gold as a safe haven. Additionally, potential shifts in interest rates, particularly with a possible rate cut from the US Fed, could make gold more attractive as a hedge against inflation and currency fluctuations. Moreover, the increasing demand for gold in the tech industry, driven by advancements in AI and high-performance computing, adds long-term value for gold buyers. These factors, combined with gold’s importance in portfolio diversification, indicate that the market will continue to be appealing to gold buyers.
