Global demand for gold skyrocketed to a two and a half year high in the 2021’s 4th quarter, resulting in a 10% full-year increase over 2020.
According to the World Gold Council’s latest report, total 2021 demand for gold (excluding Over the Counter) increased to 4,021 tons (502,625 oz.).
Thanks for that goes largely to 4th quarter demand jumping nearly 50%, and the result was the recovery of much of the pandemic-related losses of 2020.
The WGC noted that demand for gold in the consumer-driven jewelry and technology sectors recovered throughout the year — in line with economic growth and sentiment.
Global central bank buying also was far ahead of 2020’s pace. Investment demand was mixed because of high inflation competing with rising yields for investor attention.
The year ended similar to how it began, with interest rates and inflation jockeying for attention as the key driver of gold.
But unlike the 1st quarter, inflation was a more dominant factor than interest rates as 2021 came to a close. “This helped gold make up some of the ground it had lost in the early part of the year," the report said.
Neils Christensen added, “The gold market has once again proven itself that it is a global market that is more robust than just investment demand.”
Here are some of the report’s highlights:
By Dave Allen for Discount Gold & Silver
Global demand for gold skyrocketed to a two and a half year high in the 2021’s 4th quarter, resulting in a 10% full-year increase over 2020.
According to the World Gold Council’s latest report, total 2021 demand for gold (excluding Over the Counter) increased to 4,021 tons (502,625 oz.).
Thanks for that goes largely to 4th quarter demand jumping nearly 50%, and the result was the recovery of much of the pandemic-related losses of 2020.
The WGC noted that demand for gold in the consumer-driven jewelry and technology sectors recovered throughout the year — in line with economic growth and sentiment.
Global central bank buying also was far ahead of 2020’s pace. Investment demand was mixed because of high inflation competing with rising yields for investor attention.
The year ended similar to how it began, with interest rates and inflation jockeying for attention as the key driver of gold.
But unlike the 1st quarter, inflation was a more dominant factor than interest rates as 2021 came to a close. “This helped gold make up some of the ground it had lost in the early part of the year," the report said.
Neils Christensen added, “The gold market has once again proven itself that it is a global market that is more robust than just investment demand.”
Here are some of the report’s highlights:
Physical Gold. Notably, investors’ purchases of bars and coins jumped 31% to an 8-year high of 1,180 tons (147,500 oz.).
Demand in the 4th quarter of 318 tons (39,750 oz.), meanwhile, was the highest for a 4th quarter since 2016.
Jewelry. Jewelry fabrication came back convincingly last year. It grew by 67% to 2,221 tons (277,625 oz.) to meet the strong rebound in consumer demand, matching the 2019 total.
This was in good part linked to 4th quarter demand, which – at 713 tons (89,125 oz.) — was the strongest quarterly jewelry consumption since 2013.
Gains were powered mainly by the two global heavyweights — India and China, up 93% and 63%, respectively — but decent recovery was also seen in all other regions, including the U.S. (thank you, stimulus money).
Central Banks. The WGC reported that last year was the 12th consecutive year of net gold purchases, “during which time central banks have bought a net total of 5,692 tons [711,500 oz.].”
Central banks around the world bought 463 tons (57,875 oz.) of gold in 2021, 82% higher than in 2020.
Central banks from both emerging and developed markets added to their gold reserves, lifting the global total to close to a 3-decade high.
Inflation concerns were a key driver of this move, especially in the U.S. and Germany, which both saw record annual demand.
Technology. Gold used in technology — such as in medicine, aerospace and nanoparticles for plastics — grew by 9% in 2021, hitting a 3-year high of 330 tons (oz.).
ETFs. ETF outflows were the lone exception to strong recovery in demand for gold last year.
Global holdings of gold Exchange Traded Funds fell by 173 tons (21,625 oz.) in 2021 — a stark reversal of 2020’s record increase of 874 tons (109,250 oz.).
This suggests that many paper investors took profits throughout last year and reinvested proceeds in risk assets like stocks and cryptos.
Price. Gold priced in U.S. dollars fell by around 4% during 2021. Still, the average price for the year of just shy of $1,800/oz. was roughly 2% higher than 2020.
The WGC pointed out that the price “was relatively steady, holding within a broad range for much of the year.”
Total gold supply eased a tad in 2021 — down 1% at 4,666 tons (583,250 oz.), its lowest level since 2017.
Mine production recovered 2% but was counteracted by a steep 11% drop in recycling.
2022 Outlook. Earlier this month, as pointed out in a recent edition of our blog, the WGC surmised that gold “may face similar dynamics in 2022 to those of last year, as competing forces support and curtail its performance.”
In the short term, gold’s price “will likely react to real rates in response to the speed at which global central banks tighten monetary policy” in their attempt to control rising inflation.
Yet, the WGC believes that even though rate hikes can create pressures on gold, “history shows their effect may be limited.”
At the same time, it adds, “elevated inflation and market pullbacks will likely sustain demand for gold as a [safe haven] hedge.”
Plus, “jewelry and central bank…demand may provide additional longer-term support.”