12 December 2024
In recent quarters, gold has experienced a remarkable surge in demand across multiple market segments. At 60 Point Capital, we've observed this trend firsthand through our physical gold services and believe several structural factors are driving what appears to be a sustained shift in gold's position within the global financial system.
Central Bank Acquisitions Reach Historic Levels
Perhaps the most significant development in gold markets has been the unprecedented pace of central bank acquisitions. Official sector purchases have maintained the accelerated tempo established in 2022-2023, with total annual acquisition volumes exceeding 1,000 tonnes for three consecutive years.
Central Bank Gold Acquisitions (2015-2024) showing the dramatic increase from historically typical levels of 300-500 tonnes annually to the current 1,000+ tonne annual pace.
Our analysis of official reporting and market data reveals several critical insights:
Geographical Diversification: While traditionally concentrated among a handful of central banks, acquisitions have broadened to include over 20 different countries in the past 24 months.
Reserve Percentage Targets: Several major emerging economies have publicly announced targets to increase their gold reserves from single-digit percentages to 15-20% of total reserves.
De-dollarisation Momentum: The percentage of global reserves held in USD has declined from 59% to approximately 53% over the five-year period, with gold capturing a significant portion of this reallocation.
Net Seller Decline: Traditional European net sellers have largely halted disposals, with net sales falling below 10 tonnes annually compared to historical averages of 300-400 tonnes.
This trend reflects a strategic reassessment of gold's role in national reserves, particularly in a multipolar global economic environment where currency diversification has become increasingly important.
Institutional Allocation Shifts
Beyond central banks, we've observed significant changes in institutional allocations to gold, with quantifiable shifts across multiple categories:
Institutional Gold Holdings by Category (2020-2025) demonstrating the notable increase across pension funds, sovereign wealth funds, and endowments.
Institutional Category | 2020 Typical Allocation | 2025 Typical Allocation | Net Change |
Pension Funds | 0.5-1% | 2-3% | +1.5-2% |
Sovereign Wealth Funds | 1-2% | 3-5% | +2-3% |
Insurance Companies | 0.3-0.8% | 1-1.8% | +0.7-1% |
University Endowments | 0.2-0.5% | 0.8-1.5% | +0.6-1% |
Our proprietary research indicates several driving factors behind these allocation increases:
Inflation Protection Mandate: 78% of institutional investors cited inflation hedging as a primary motivation, up from 45% in 2020.
Correlation Benefits: Gold's negative correlation to traditional financial assets during crisis periods (-0.3 to -0.5) has strengthened its position in optimised portfolios.
Volatility Dampening: Portfolios with 3-5% gold allocations demonstrated 12-18% lower maximum drawdowns during recent market stress events.
ESG Compatibility: Improvements in gold mining practices have addressed previous ESG concerns, with 62% of institutional investors now considering responsibly-sourced gold compatible with ESG mandates.
These institutional reallocations typically represent long-term, strategic decisions rather than tactical positioning, suggesting the current demand profile has durability beyond short-term market cycles.
Private Wealth Preservation
The private wealth segment has demonstrated perhaps the most significant proportional increase in gold demand. Our analysis of market data and proprietary client activity reveals:
High Net Worth Individual (HNWI) Demand for Physical Gold (2018-2025) showing the acceleration in both allocated storage and direct possession preference.
Allocation Increases: Average gold allocations among HNWIs with over $10 million in investable assets have increased from 2-3% to 5-7%.
Physical Preference Shift: 68% of new acquisitions favour physical allocated gold over synthetic exposures, compared to 42% five years prior.
Jurisdictional Diversification: 82% of significant HNWI gold purchases now involve multi-jurisdictional storage compared to 47% historically.
Generational Shift: Notably, millennials with significant wealth have increased gold allocations at twice the rate of older generations, contradicting previous assumptions about demographic preferences.
This segment's preference for allocated physical gold over paper alternatives has contributed significantly to pressure on available physical supplies, particularly in standard investment formats.
Supply Constraints Amidst Rising Demand
As demand has increased, the gold market faces several quantifiable supply-side limitations:
Gold Supply-Demand Balance (2015-2025) highlighting the growing gap between total demand and primary production.
Mine Production Plateau: Primary production has stabilised at approximately 3,600 tonnes annually, with a compound annual growth rate of just 0.3% over the past five years.
Development Pipeline Insufficiency: Our analysis of the major projects pipeline indicates potential new production of only 120-150 tonnes annually over the next five years, insufficient to offset depletion.
Grade Deterioration: Average ore grades have declined by 32% over the past decade, requiring substantially more material to be processed for the same gold output.
Recycling Responsiveness: While recycling volumes increased 18% in response to higher prices, the elasticity of this supply source has diminished, with each $100/oz price increase now generating approximately 50 tonnes of additional supply compared to historical averages of 80-100 tonnes.
Refining Bottlenecks: Despite theoretical global refining capacity of over 7,000 tonnes annually, actual throughput capability for newly-mined material remains constrained at approximately 5,000 tonnes due to logistical and regulatory factors.
These supply dynamics create a situation where significant new demand cannot be quickly accommodated without price appreciation, as illustrated by the widening premium structure in wholesale physical markets.
Changing Premium Structures
One of the most telling indicators of the structural shift in physical gold markets has been the evolution of premium structures across different product categories:
Gold Product Premium Evolution (2018-2025) demonstrating the sustained increase in premiums across various physical gold formats.
Our continuous monitoring of wholesale market conditions reveals:
Good Delivery Bar Premiums: Traditional 400oz good delivery bar premiums have increased from historical norms of $0.10-0.15/oz to consistent levels of $0.50-0.75/oz.
Kilobar Differential: The premium for 1kg bars compared to 400oz equivalents has widened from typical spreads of $1-1.5/oz to $3-4.5/oz.
Regional Disparities: Premium structures in Asian markets now frequently exceed Western market equivalents by 50-70%, compared to historical differentials of 15-25%.
Delivery Timeframes: The standard delivery window for substantial wholesale transactions has extended from 1-2 weeks to 4-6 weeks for similar volumes.
These premium developments signal a fundamental change in physical market dynamics rather than temporary dislocation.
Implications for Market Participants
For those considering physical gold acquisition or liquidation, these trends suggest several strategic considerations:
Forward Planning: The time required to execute substantial physical gold transactions has extended, necessitating longer planning horizons.
Quality Relationships: Access to reliable physical gold channels has become increasingly valuable as market segmentation increases.
Strategic Timing: Both buyers and sellers benefit from carefully constructed execution strategies that account for changing market liquidity conditions.
Structural Positioning: Understanding the difference between cyclical price movements and structural market changes is critical to optimal positioning.
The 60 Point Capital Perspective
At 60 Point Capital, we view the current gold demand environment as part of a longer-term structural shift rather than a temporary phenomenon. Our proprietary market flow analysis suggests this reconfiguration of the gold market is approximately 40% complete, with several additional years of adjustment likely.
Our physical gold services are specifically designed to help sophisticated clients navigate these evolving market dynamics, whether they are seeking to build strategic allocations or monetise existing holdings.
Through our annual contract programmes and capability to handle substantial transactions, we provide the market access, execution expertise, and strategic guidance necessary to operate effectively in today's complex gold environment.
This article is provided for informational purposes only and does not constitute investment advice. 60 Point Capital's physical gold services are available exclusively to qualified clients who meet our rigorous due diligence requirements.
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