Buying ASX 200 gold shares? Here's why global gold demand 'may surprise to the upside'

The All Ordinaries Gold Index has soared 37.3% in 12 months.

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Leading S&P/ASX 200 Index (ASX: XJO) gold shares have absolutely smashed the benchmark returns over the past 12 months.

Since this time last year, the ASX 200 is down 2.3%.

But with most Aussie gold stocks rallying, the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold shares – has soared 37.3% in 12 months.

Here's how these three big gold producers have fared over the full year:

  • Northern Star Resources Ltd (ASX: NST) shares are up 33.1%
  • Ramelius Resources Ltd (ASX: RMS) shares are up 112.4%
  • Newcrest Mining Ltd (ASX: NCM) shares are up 32.8%

Atop their own mining successes, the miners have all enjoyed some heady tailwinds from a rising gold price.

This time last year an ounce of gold was trading for US$1,634. Today that same ounce is worth US$1,979, a gain of more than 21%.

And that run higher may not be over yet.

More tailwinds for ASX 200 gold shares?

According to the World Gold Council's Q3 Gold Demand Trends report, quarterly global demand for the yellow metal (excluding over the counter) reached 1,147 tonnes. That's 8% higher than the five-year average.

And ASX 200 gold shares have central banks to thank for some of their outperformance, with the World Gold Council pointing to ongoing central bank bullion buying as helping maintain this "historic pace".

Indeed, Q3 saw central banks buying 337 tonnes of bullion, the third strongest quarter of net buying on record. That brings year to date central bank purchases to 800 tonnes, representing a new all-time high in the World Gold Council's data series.

On the supply side of the equation, total gold supply increased by 6% year on year in Q3. The report indicated that mine production reached a year-to-date record of 2,744 tonnes.

Now what?

Looking to what could impact ASX 200 gold shares in the months ahead, the World Gold Council report notes that, "This strong buying streak from central banks is expected to stay on course for the remainder of the year, indicating a robust annual total again in 2023."

Commenting on the outlook for the yellow metal, and by connection ASX 200 gold shares, World Gold Council senior markets analyst Louise Street said:

Looking forward, with geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside.

"Gold is the classic safe-haven asset," Shane Oliver, chief economist at AMP, added (quoted by The Australian Financial Review).

According to Oliver:

It's really that demand pushing it up. There are also more signs the Fed is close to the top on interest rates – if the Fed delivers some sort of easing and a declining US dollar next year, that's positive for gold as well.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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