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2022: strongest year for gold demand in over a decade

Feb 3, 2023

Colossal central bank purchases, aided by vigorous retail investor buying and slower exchange-traded fund (ETF) outflows, lifted annual demand to an 11-year high and 2022 gold demand almost matched the 2011 record. Annual gold demand (excluding over- the- counter) jumped 18% to 4,741 tonnes, almost on a par with 2011 – a time of exceptional investment demand. The strong full-year total was aided by record Q4 demand of 1,337 tonne. 

Jewellery consumption softened a fraction in 2022, down by 3% at 2,086 tonne. Much of the weakness came through in the fourth quarter as the gold price surged. 

Investment demand (excluding OTC) reached 1,107 tonne (+10%) in 2022. Demand for gold bars and coins grew 2% to 1,217 tonne, while holdings of gold ETFs fell by a smaller amount than in 2021 (-110t vs. -189t), which further contributed to total investment growth. Quarterly fluctuations in OTC demand largely netted out over the year. 

A second consecutive quarter of huge central bank demand (417 tonne) took annual buying in the sector to a 55-year high of 1,136 tonne, the majority of which was unreported. 

Demand for gold in technology saw a sharp Q4 drop, resulting in a full-year decline of 7%. Deteriorating global economic conditions hampered demand for consumer electronics. 

Total annual gold supply increased by 2% in 2022, to 4,755 tonne. Mine production inched up to a four-year high of 3,612 tonne. 
Forecasts on the price of gold for 2023 however indicated that  ETF and OTC demand to take the baton from bar and coin. Gold ETF and OTC demand, depressed during 2022, looks set to lead in 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.

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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. 

The World Gold Council 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.

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