Research library

The global COVID-19 pandemic fuelled safe-haven investment demand for gold, offsetting marked weakness in consumer-focused sectors of the market.

The benefits of certain portfolio hedges came into clear focus during the 2008-2009 financial crisis and did so again during the subsequent European sovereign debt crisis, the 2018 December stock market pullback and the most recent COVID-19 pandemic.

We believe that the recent volatility in the gold price was driven by massive liquidations across all assets and likely magnified by leveraged positions and rule-based trading.

Gold demand fell 1% in 2019 as a huge rise in investment flows into ETFs and similar products was matched by the price-driven slump in consumer demand.

Risk appetite amid high uncertainty
As we look ahead, we expect that the interplay between market risk and economic growth will drive gold demand in 2020

The global bullion banking industry is large and well-established with annual revenues estimated at more than US$1.5bn. The market includes both international banks and smaller local players.

Gold demand was 1,123t in Q2, up 8% y-o-y. H1 demand jumped to a three-year high of 2,181.7t, largely due to record-breaking central bank purchases.

The first half of 2019 proved quite eventful for financial markets. Stocks retraced their Q4 2018 losses by the end of April only to pullback again in May.

Gold demand lifted by central banks and ETFs. This compares with a relatively weak Q1 2018, when demand sank to a three-year low of just 984.2t. Central bank buying continued apace: global gold reserves grew by 145.5t.