31 January, 2023

Trading places: ETF and OTC demand to take the baton from bar and coin in 2023

  • Investment is expected to rise in 2023. Gold ETF and OTC demand – depressed during 2022 – looks set to take the baton held by last year’s strong retail bar and coin demand. Retail investment will likely be lower in Western markets albeit still healthy, as inflation fears fade, but should be robust in Asia on higher growth. However, elevated recession and geopolitical risks will likely sustain interest in gold and present upside potential as the year progresses
  • Central bank buying is unlikely to match 2022 levels. 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
  • We expect jewellery demand to improve further on a resilient 2022, but caution that strong base effects in Chinese demand could be undermined if a more severe global slowdown drags down demand elsewhere. China’s re-opening, with its pent-up and growth-driven demand for jewellery, will inject welcome momentum, although recurrent COVID spikes are a potential headwind. A sluggish start to the year for Indian demand could persist if local prices remain elevated
  • Total supply is expected to rise modestly again in 2023 as expansion at existing operations provides a production uplift. Recycling is expected to fall but upside risks can’t be ruled out as inflation falls in Western markets and the spectre of recession-driven distress selling rears its head.

Expected change in annual demand, 2023 vs 2022*

Expected change in annual demand, 2023 vs 2022*

Expected change in annual demand, 2023 vs 2022*
Chart 1 *Technology demand has been removed due to its small relative contribution

Sources: World Gold Council; Disclaimer

*Data to 31 December 2022. Fabrication combines global jewellery and technology demand. Investment includes ETFs, bar and coin and OTC demand., Supply includes mine production and recycling. We have omitted hedging and assume it to be unchanged.

Full year outlook

In December we published our 2023 Gold Outlook. The data for Q4’22 – and, where available y-t-d – remains consistent with the central scenario in the outlook and has not altered our 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.

Investment: upside likely in 2023

A lacklustre 2022 for ETF and OTC demand is likely to set the stage for a year of growth in investment. 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. As investors have settled the likely peak level of interest rates, rate hikes will pose less of a problem. In addition, continued weakness in the US dollar, growing recession risks, a continued high bond-equity correlation and elevated geopolitical risk form the backbone of a positive tactical case for gold in 2023, in our view.

Inflation is likely to continue to fall in 2023. But we see this as more of a headwind for retail bar and coin than institutional investment demand. As we noted in the last GDT, scant access to alternative inflation hedges drove strong demand for gold in many Asian and Middle East economies in 2022. Should inflation fall, then some slowdown in demand should be expected. What we do not expect is an unwind, as retail demand for gold tends to be sticky. 

Fabrication demand: 2023 demand to capitalise on a resilient but low 2022

Jewellery demand is likely to capitalise on a resilient 2022, driven primarily by the reopening of China. An economic rebound, pent-up demand and a flat local price should see demand in line with levels in 2016 to 2018. However, a lacklustre post-COVID response similar to that experienced in the West – where equally pent-up spending on other goods and services took precedence over gold – remains a risk, as do further COVID spikes. In addition, the possibility of a more severe economic slowdown in other regions could offset some of the anticipated Chinese demand strength.

In contrast, a weak Q4 and an anecdotally poor start to 2023 suggests Indian jewellery demand won’t match the expected growth in China. A higher number of auspicious wedding days (67 in 2023 vs 55 in 2022) and higher market prices of Kharif crops 1 should be supportive, but a higher local price and persistent rural inflation might prevent some buying.

The outlook for technology demand in 2023 remains poor as sanctions on China and faltering consumer demand continue to weigh on the electronics sector. In addition, the recession risks materialising in Europe and the US will further curtail demand in discretionary goods spending. However, inventory adjustments are projected to continue across the industry and this may provide some support for demand towards the end of the year.

Central banks: matching 2022 will be a tall order. 

Central bank demand remains difficult to forecast partly because it can be policy driven and does not always respond to the most common economic drivers we use to analyse other sectors. In addition, discretionary reporting of holdings, often with a lag, suggests a strong possibility for surprises. But a slowing of growth in total reserves is likely to put pressure on some central banks, reducing their capacity to allocate to gold. We therefore think it likely that 2023 buying will be more moderate.

Supply: mine production has the potential for good growth again in 2023

Output from across the Americas, led by expansion of existing projects in North America, is likely to result in higher in 2023 production, perhaps surpassing the previous high in 2018.

A higher local price in dominant recycling regions in 2022 did not elicit the rise in recycling that models might have suggested. But prior to the year-end rally, gold was lower for several months, curtailing some price-related recycling. High inflation also likely prompted some to hang on to their gold. An expected fall in inflation next year alongside a high recession risk, raises the possibility that both inflation- and distress-related selling will edge up during 2023.  


  1. Kharif crops are monsoon crops which are cultivated with the onset of monsoon season (June) in India and are harvested after the end of the monsoon season (October-November).

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