Gold: Gold: Timeless Stability, Future Security

The World Gold Council’s Q2 2024 gold demand trends report reveals that total global gold demand increased 4% year-on-year to 1,258t - which was the highest Q2 demand on record.

Gold jewellery represents the largest source of annual demand for gold per sector. This has declined over recent decades, but it still accounts for around 50% of total gold demand. Investment in gold is another key driver, thanks to its unique properties as an asset class, reducing volatility and minimising losses during periods of market shock.

Central banks have been net buyers of gold, adding to their reserves as part of a strategy to diversify away from the US dollar and protect against geopolitical risks. Gold is also used as an industrial metal in a broad range of applications, but primarily in electronics for its excellent conductivity and resistance to corrosion, making it essential in components like connectors, switches, and circuit boards. Its conductive properties are also presenting exciting new opportunities in medicine, diagnostic testing kits and new nanotechnologies which are being trialled to tackle cancer.

Gold 247 is the World Gold Council’s initiative aimed at transforming the availability and liquidity of gold, making it easier for investors, institutions, and consumers to buy and sell gold digitally. The new system would allow physical gold to change ownership as easily as digital currency, while providing buyers with transparency about where the gold originated. This will help the market to meet the challenges of today’s consumers and investors, particularly in relation to ESG issues.

You can already buy gold on your smartphone. Companies such as GoldMoney and BullionVault allow users to purchase fractional amounts of gold, which are backed by physical gold stored in secure vaults. There are also platforms that allow users to buy, sell, and store gold using blockchain technology that creates tokenised gold, where each digital token is backed by a specific amount of physical gold. A modern asset, you can easily invest in gold online via apps or websites—meaning you can own gold as a way of saving for tomorrow without ever taking physical possession of it.

It’s important to note that gold is generally viewed as a way to diversify a portfolio and hedge against risk rather than as a primary growth investment.

However, over the past few decades, gold has delivered an average annual return of around 6-8%. For example, from 1971 (when the U.S. left the gold standard) to 2020, gold's average annual return has been roughly 7.5%.

In the last 5 years, gold prices have been volatile but have seen positive returns, with an average growth rate of about 9-10% per year, driven by the global uncertainty caused by the pandemic and inflation concerns.

The digitisation of gold is a relatively new concept, and is still subject to regulatory scrutiny, especially with regard to anti-money laundering (AML) and know-your-customer (KYC) requirements. There is therefore an ongoing adjustment period as the regulatory environment navigates unprecedented levels of accessibility, liquidity, and opportunity in the gold market. While digital gold products are gaining popularity, widespread adoption still faces challenges, including consumer education, market acceptance, and integration with traditional financial systems.

While progress has been made, challenges remain in fully integrating ESG standards across the supply chain. Artisanal and small-scale mining, which accounts for a significant portion of global gold production, often lacks proper ESG oversight and poses environmental and social risks, such as child labor and unsafe working conditions. However, the successful roll out of the Gold 247 initiative will help to combat many of these issues by tracking the provenance of gold with a digital system, meaning consumers can avoid gold associated with issues such as child labor or reckless environmental practices.