The annual demand for gold (excluding OTC) in 2022 has risen 18% on-year, hitting an 11-year high, according to the World Gold Council’s latest report. The annual demand for gold surged to 4,741 tons, propelled by a record breaking fourth quarter. Retail investors and central banks flocked to the safe haven asset as fears of a global economic slowdown loomed. Despite numerous headwinds such as growing interest rates, a strong US dollar and geo-political tensions, gold ended CY22 with a mild gain at $1,800 per ounce. Although the prices in December were marginally weaker, the rally in November boosted the price sharply.
Additionally, the supply for gold in 2022 edged higher, growing 2% to 4,755 tonnes, sustaining above the pre-pandemic level. Production from mines touched a four year high at 3,612 tonnes. The demand for gold from central banks more than doubled to 1,136 tonnes in 2022. Consumption and purchases for jewelry didn’t meet the same vigor, as prices soared, the demand softened by 3%. The reduction in demand was a result of the sustained drop in China, since consumption was curtailed by Covid and the resulting lockdown.
As the world reeled from the weakness in the Chinese economy, demand for gold as an investment skyrocketed by 10%. Gold bars and coins continued to garner interest from investors as the yellow metal successfully offset the weakness from China. European demand for bars and coins crossed 300 tonnes, boosted by increasing demand from Germany. The Middle East saw significant growth as well, with demand rising 42% on year.
“Last year we saw the highest level of annual gold demand in over a decade, driven in part by colossal central bank demand for the safe haven asset. Gold’s diverse demand drivers played a balancing act as rising interest rates prompted some tactical ETF outflows, while elevated inflation spurred on gold bar and coin investment. In the end, overall investment demand was up 10% on the previous year,” said Louise Street, Senior Markets Analyst, World Gold Council.
She added, “Turning to 2023, economic forecasts are pointing to a challenging environment and a likely global recession which could lead to a role reversal in gold investment trends. If inflation comes down, this could be a headwind for gold bar and coin investment. While there are several possible outcomes, gold has a precedent for performing well in turbulent economic times, highlighting its value as a long-term, strategic asset.”