Data on gold demand trends for all of 2022 is available, revealing that 2022 was the strongest year for the precious metal in over a decade. Last year saw a London Bullion Market Association (LBMA) record annual price of $1,800 an ounce and closed with a marginal gain in the gold price despite significant headwinds.
General Gold Demand Trends in 2022
In its “Gold Demand Trends” report for the fourth quarter and all of 2022, the World Gold Council reported an 18% increase in annual demand for gold, excluding over-the-counter demand. At 4,741 tonnes, demand for gold was close to the peak recorded in 2011, which the council described as “a time of exceptional investment demand”. The fourth quarter saw record gold demand of 1,337 tons.
The World Gold Council cited the strength of the American dollar and the increase in global interest rates as major obstacles to the price of gold. Fourth quarter average price was slightly lower both quarter-over-quarter and year-over-year.
However, the strong rally in November was followed by a steady recovery in the weeks leading up to the end of the year. The World Gold Council described central bank buying as “colossal” in 2022, adding that “vigorous” buying among retail investors also gave a boost to the gold price along with slower outflows of exchange-traded funds.
the heart of the matter
The organization described retail investment demand (excluding OTC demand) as “energetic” at 1,107 tonnes in 2022. Total investment demand rose 10% in 2022, lifting demand for gold bars and coins by 2% to 1,217 tons, its highest level in nine years. . Gold ETF holdings declined less than in 2021, falling 110 tonnes in 2022 versus a year-ago decline of 189 tonnes.
Meanwhile, gold jewelry consumption softened slightly in 2022, falling 3% to 2,086 tons. The World Gold Council reported that much of that weakness occurred in the fourth quarter due to rising gold prices.
However, central bank purchases posted a second consecutive “huge” quarter demand for gold to 417 tonnes, pushing full-year gold purchases by central banks to the highest level in 55 years, at 1,136 tonnes. The World Gold Council clarified that most of those purchases were unreported.
Technology-related gold demand plunged sharply in the fourth quarter, dragging down full-year demand for the sector by 7%. The board suggested that demand for consumer electronics plummeted during the quarter due to the deterioration in the global economy.
Gold Demand by Region
Regionally, COVID-related shocks continued to weigh on demand in China, resulting in a sharp slowdown there. However, Europe, Turkey and the Middle East posted solid growth, offsetting the drop in Chinese demand.
Gold demand in India remained resilient in 2022 compared to pre-pandemic levels. Although 2022 started relatively soft, Indian consumer demand picked up as the year progressed, ending the year just shy of the robust demand seen in 2021.
The World Gold Council reported that the ongoing recovery from the pandemic boosted full-year comparisons, though demand was hampered in December by a strong rebound in gold prices domestically in India.
Gold supply marked up
Gold supply rose 2% in all of 2022, ending a two-year streak of declining supply as it rose to 4,755 tonnes on the back of modest gains across all segments. Mine production reached a four-year high of 3,612 tonnes, contributing to increased gold supply.
While mine production increased 1% through all of 2022, it failed to match the peak reached in 2018. Only marginal gains from annual recycling supply were seen despite strong price increases in local currencies seen in many markets .
What to expect for 2023
The World Gold Council predicts that gold investment will increase in 2023, with OTC and ETF demand replacing retail demand for bars and coins as the main drivers of growth. The organization noted that OTC demand and ETF demand dropped in 2022.
However, he expects retail investment in Western markets to decline in 2023 but remain healthy as inflation concerns fade. On the other hand, the World Gold Council expects strong demand for gold in Asia due to higher growth in the region.
Meanwhile, the council warned that the risk of a recession remains high, as do geopolitical risks stemming from the war in Ukraine and other global concerns. He expects these risks to support interest in the yellow metal, presenting the possibility of an upside as the year progresses.
The World Gold Council does not expect central banks to buy as much gold in 2023 as they did in 2022. It warned that the reduction in total reserves could restrict the ability to increase existing allocations to the precious metal. However, the council also noted that some central banks report changes to their gold allocations with a significant lag, which invites a significant level of uncertainty, predominantly on the upside.
The World Gold Council looks for continued improvements in demand for gold jewelry in 2023 as a follow-up to the resilience seen in 2022. However, it also warned that a more severe economic downturn could weigh on global demand, undermining the potential for further demand. solid. Trends in China.
The council predicts that China’s reopening of its zero-COVID policy created pent-up demand for gold jewelry in the country, though potential headwinds include a new wave of COVID infections. The World Gold Council also noted that demand for gold in India started 2023 at a slow pace, which could continue if prices in India remain high.
It predicts a modest increase in total gold supply in 2023 amid expansion of existing operations. Although the council expects recycling activities to slow, it suggested falling inflation in the West and sales fueled by recession woes could push higher against its predictions.
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