Gold may face similar dynamics in 2022 than those from last year as competing forces support and curtail its performance.
Gold benefits from diverse sources of demand: as an investment, a reserve asset, jewellery, and a technology component. It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.
Strong Q4 lifts full year demand 10%
Annual demand recovered across virtually all sectors – the notable exception being ETFs, which saw net annual outflows
Geopolitical crisis takes centre stage in February
India has a long history of mining gold, but at a low level: 2020 gold mine production was just 1.6 tonnes. Legacy processes are in part to blame: investment in the sector has been discouraged by unwieldy processes.
Gold market sees solid start to 2022
Q1 gold demand was 34% above Q1 2021, driven by strong ETF inflows. In a quarter that saw the US dollar gold price rise by 8%, gold demand (excluding OTC) increased 34% y-o-y to 1,234t – the highest since Q4 2018 and 19% above the five-year average of 1,039t.
Throughout April, gold remained among the best performing assets in 2022 up 5% in US dollar terms – yet it ended the month 1.6% lower at US$1,911/oz.
As India’s demand for gold outpaces its domestic mine supply, demand is fulfilled by imports as well as gold recycled locally. Recycling in India is a Rs440bn industry making up 11% of the average local annual supply.
Gold demand softened in Q2. Despite Q2 weakness, strong first quarter ETF inflows fuelled a notable H1 recovery Gold demand (excluding OTC) was 8% lower y-o-y at 948t. Combined with Q1 this took H1 demand to 2,189t, up 12% y-o-y.
Gold ended August lower m-o-m, down 2% to US$1,715.9/oz – its fifth consecutive monthly decline. The promising bounce that began in mid-July ran out of steam in mid-August after failing to break the US$1,800/oz resistance level.