Gold demand highest in 2022
The World Gold Council (WCG) has described the year 2022 as a year with the highest gold demand in over a decade on the back of colossal purchases made by central banks, retail investor buying and slower ETF outflows.
Rudairo Mapuranga
According to the WGC in its Gold Demand Trends report for 2022, annual gold demand jumped 18 per cent to 4,741 tonnes, with a strong full-year total Q4 record demand of 1,337 tonnes.
The report states that the demand for gold bars and coins grew 2 per cent to 1,217 tonnes, with the investment portion of demand reaching 1,107 tonnes, representing a 10 per cent increase over 2021. It also outlined that holdings of gold ETFs fell by a smaller amount than in 2021, which further contributed to total investment growth. Quarterly fluctuations in OTC demand largely netted out over the year.
Jewellery consumption according to the report softened a fraction in 2022, down by 3 per cent at 2,086 tonnes. Much of the weakness came through in the fourth quarter as the gold price surged.
“Demand for gold in technology saw a sharp Q4 drop, resulting in a full-year decline of 7 per cent. This was a consequence of deteriorating global economic conditions, which hampered demand for consumer electronics.”
Gold purchases by Central banks In 2022 totalled 1,136 tonnes which is worth $70 billion, which was by far the biggest purchase of any year since 1967. Purchases in Q4 alone (417 tonnes) almost matched that of 2021 (450 tonnes).
The trend underlines a shift in attitudes to gold since the 1990s and 2000s, when central banks, particularly those in Western Europe that own a lot of bullion, sold hundreds of tonnes a year. Since the financial crisis of 2008-09, European banks stopped selling and a growing number of emerging economies such as Russia, Turkey and India have bought.
Central banks like gold because it is expected to hold its value through turbulent times and, unlike currencies and bonds, it does not rely on any issuer or government. It also enables central banks to diversify away from assets like US Treasuries and the dollar.
Outlook for 2023
Looking ahead, the WGC said it has not altered its view of a good year for gold, with more upside potential than downside risk given a growing risk of recession in the US and Europe.
“A lacklustre 2022 for ETF and OTC demand is likely to set the stage for a year of growth in investment,” said the WGC, noting that “gold’s stable performance in 2022, despite strong headwinds from rising rates and a strong dollar for most of the year, has reignited investor interest.”
“Jewellery demand is also likely to capitalize on a resilient 2022, driven primarily by the reopening of China,” the WGC added.
Central bank buying – despite the latest trend – is unlikely to match 2022 levels, according to the Council, as demand remains difficult to forecast partly because it can be policy-driven and does not always respond to the most common economic drivers.
“Lower total reserves may constrain the capacity to add to existing allocations. But lagged reporting by some central banks means that we need to apply a high degree of uncertainty to our expectations, predominantly to the upside,” the WGC said.