According to precious metals analysts at Heraeus, the European and Chinese markets are set to fuel increased demand for gold, while silver’s long-anticipated breakout is gaining momentum. In their latest market update, the analysts highlighted key dynamics shaping the global demand for these precious metals, particularly gold’s sustained rise and silver’s recent surge.
The report emphasizes that global demand for gold is expected to continue climbing, especially as the Chinese market enters its peak buying season. “Gold withdrawals from the Shanghai Gold Exchange (SGE) increased by 12.8% month-on-month in September, following the typical seasonal trend as wholesalers stocked up ahead of the Golden Week holiday in early October,” the analysts noted. “These withdrawals reflect demand from wholesalers and banks within China. As we move deeper into the fourth quarter, consumer gold demand is anticipated to follow its seasonal pattern and pick up.”
Notably, the analysts pointed out that while the saving rate in China is near record highs, consumer confidence is at an all-time low. This suggests that although there is plenty of cash available, consumers are hesitant to spend. “If government stimulus succeeds in boosting consumer sentiment, we could see an increase in spending, with a portion likely directed towards luxury goods and jewelry,” they added.
Despite soaring gold prices dampening overall demand in mainland China, Heraeus analysts maintain that the broader trend is holding steady. “Withdrawals from the SGE are improving, but at a lower rate compared to 2023 and the five-year average,” the report stated. “In fact, withdrawals were down 31% year-on-year in the third quarter of 2024, amounting to 305 tonnes. Even though withdrawals are rising, this suggests that China’s annual gold demand may decline in 2024, unless fourth-quarter consumption significantly outperforms last year—which seems unlikely, even with stimulus measures in place.”
The report also highlighted that gold continues to reach new all-time highs, despite the persistent strength of the U.S. dollar. Analysts further pointed out that European monetary policy will continue to bolster gold’s performance. “Last Thursday, the European Central Bank (ECB) cut interest rates for the third consecutive time as its focus shifted from inflation control to growth stimulation,” they said. “This ongoing monetary easing is expected to weaken the euro against other major currencies, further supporting the euro-denominated gold price, which reached another all-time high last week. With the gold price increasing by nearly a third this year, it has now surpassed its 2007 full-year performance of 30.9%. The year 2024 is shaping up to be one of the most remarkable years for gold in nearly five decades.”
Shifting focus to silver, the analysts from Heraeus highlighted recent growth in silver Exchange-Traded Fund (ETF) holdings, though they see potential for further expansion. “Despite silver prices hovering just below a 10-year high, silver ETF holdings remain similar to 2023 levels,” the report said. “There have been net inflows of 30 million ounces (moz) this year, reversing the net sales of 19 moz recorded as recently as June. Currently, total holdings sit at 730 moz, which suggests a somewhat muted response to the recent surge in silver prices, which are at their highest in a decade. At their peak, silver ETF holdings surpassed 1 billion ounces, even though the silver price was 15% lower than it is today.”
Heraeus remains optimistic about silver’s prospects, attributing its breakout to several key factors. “Silver is benefiting from favorable macroeconomic conditions, including lower real interest rates that support investment in bullion,” they wrote. “Additionally, China’s efforts to stimulate its economy are likely to boost demand for silver, particularly from the industrial sector. Based on historical patterns, investors still have room to increase holdings from the current base, but a decisive breakout to new highs may be required to drive this further.”
The report also observed that silver hit another cycle high last week. “By Friday, after four consecutive days of gains, silver closed 2.55% higher at $32.48 per ounce. Should silver manage to close above its key resistance level of $32.94 per ounce, a more rapid ascent could follow,” they explained.
Indeed, silver has broken through the $33-per-ounce mark, and by Monday morning, the gray metal had already surpassed $34. As of the time of writing, spot silver was trading at $34.073 per ounce, reflecting a daily gain of 1.07%.
Bullion Mart Experts’ Analysis
At Bullion Mart, we carefully monitor market movements to provide valuable insights to our clients, and the latest analysis from Heraeus highlights significant trends in the precious metals landscape, particularly for gold and silver. Let’s break down some of the key takeaways and what they mean for investors.
Gold Demand: A Story of Resilience and Regional Dynamics
Heraeus’ report underscores the continuing strength of global gold demand, driven primarily by market conditions in China and Europe. Gold withdrawals from the Shanghai Gold Exchange (SGE) have surged in response to the seasonal peak in Chinese buying. While this signals robust demand, the report also cautions that year-on-year withdrawals are still down, suggesting overall demand in China could be softer in 2024.
For investors, this presents an interesting dynamic. Chinese consumers are sitting on significant savings, but low consumer confidence is dampening spending. However, if government stimulus measures successfully restore confidence, we could see a sharp rebound in gold purchases, especially in luxury and jewelry segments. Investors should keep an eye on China’s economic policies, as they could directly impact gold demand.
European market dynamics are another key factor in supporting gold prices. With the European Central Bank (ECB) continuing to cut interest rates, there is a clear shift towards growth-focused policies, which tend to weaken the euro and push up euro-denominated gold prices. For those holding gold, this trend is favorable, especially as 2024 shapes up to be one of the strongest years for gold prices in nearly half a century.
Silver’s Breakout: A Long-Awaited Surge
Heraeus’ analysis points to silver finally making its long-anticipated breakout. With silver prices climbing to decade-highs and ETF holdings expanding, silver is benefiting from significant tailwinds. One of the key drivers behind this rise is industrial demand, particularly from China, as the country’s economic stimulus also supports silver consumption in the industrial sector.
For silver investors, this is an encouraging sign. The relatively low levels of ETF holdings, compared to historical peaks, suggest that there is still room for further accumulation. Additionally, if silver manages to hold above key resistance levels—such as the $33 per ounce mark—there’s potential for rapid price growth, offering an opportunity for both long-term holders and new investors.
The Role of Monetary Policies
Both gold and silver are being heavily influenced by global monetary policies, particularly the ongoing shift toward more accommodative policies in major economies. Lower interest rates typically weaken currencies and support demand for safe-haven assets like gold and silver. With both the European Central Bank and the U.S. Federal Reserve easing monetary conditions, we expect continued support for precious metal prices in the near term.
Bullion Mart’s Outlook
At Bullion Mart, we believe these developments present unique opportunities for both gold and silver investors. Gold remains a resilient asset, especially in times of economic uncertainty, and the current market dynamics—driven by Chinese demand and European monetary policy—suggest that it will continue to perform strongly. Silver, on the other hand, is finally showing signs of the breakout that investors have been anticipating, supported by both industrial demand and favorable macroeconomic conditions.
As always, we encourage investors to stay informed and consider diversifying their portfolios with precious metals to hedge against economic uncertainties. Gold and silver have demonstrated time and again that they are reliable stores of value, and with the current market momentum, now may be an opportune time to consider increasing your holdings.