Q42021 gold demand surges with inflation: World Gold Council

London

THE demand for gold soared in the fourth quarter of 2021 due to soaring inflation, which helped make up for the precious metal's losses incurred for much of the past 2 years due to the coronavirus pandemic.

In its latest report on gold demand trends, the World Gold Council (WGC) noted that there was a 50 per cent year-on-year surge in the price of gold in the final 3 months of last year.

The demand "recouped much of the Covid-related losses" sustained during 2020, said the council.

Its data showed that gold jewellery consumption grew 52 per cent in 2021, which raised total annual demand by 10 per cent to 4,021 tonnes worth US$123 billion, "virtually matching the 2013 record", the WGC said.

These numbers prove that, despite the popularity of cryptocurrencies these days, gold - seen as a haven investment during times of economic uncertainty and crisis - remains a popular asset and store of value.

In the fourth quarter, gold briefly fluctuated between extremes of US$1,745 and US$1,880 an ounce, but mostly the trading range has been around 3 per cent between US$1,780 and US$1,820.

For the 12th straight year, central banks bought heavily into gold. Last year, they purchased some 463 tonnes, raising their holdings to 34,592 tonnes.

Those bullion reserves - plus hoarding of bars, coins, exchange-traded funds and jewellery - placed above-ground global holdings of gold at 205,238 tonnes worth around US$11.8 trillion, the WGC estimated.

Gold demand in "the consumer-driven jewellery and technology sectors recovered throughout the year in line with economic growth and sentiment, while central bank buying also far outpaced that of 2020", the council added.

As for how 2022 might pan out, the WGC said the current demand faces a number of risks due to factors such as a slowdown in China and the uncertainty of Covid-related restrictions.

The strong gold jewellery demand from Asia, notably India and China, along with central bank purchases helped stabilise the market.

In India, thousands of postponed weddings due to the pandemic finally took place in 2021, which in turn drove the demand for physical gold upwards.

Indian consumption soared by 93 per cent to hit 611 tonnes last year, while the demand in China jumped by 63 tonnes to reach 675 tonnes.

Demand in China was primarily supported by economic recovery from 2020 and a relatively stable gold price during the past year.

There was a 24 per cent rise in Chinese jewellery consumption in the fourth quarter.

The surging popularity of Chinese heritage gold jewellery items and increasing adoption of the per-gram pricing method also contributed to the healthy performance.

"Looking ahead, a possible slowdown in China's economic growth and the trend of declining marriage registrations might present challenges," the WGC said, adding that a "stable or declining gold price could provide support".

Demand for jewellery in Indonesia was 27 tonnes for the full year, an increase of 6 tonnes from 2020 but still well below the 40-tonne annual average of the preceding 5 years.

The annual demand for gold jewellery in Thailand was around 8 tonnes, a 38 per cent increase from 2020.

The worries about rising inflation were a key driver of gold demand, especially in major economies like the United States and Germany that both experienced record annual demand, said the council.

"Investment may struggle in 2022 amid competing forces, but consumer demand should hold strong and central banks will likely keep buying," the report said.