At the end of 2021, global demand for gold (excluding the OTC market) reached 4,021 tons, supported by a 50% increase in the fourth quarter. Increased by 10% YoY
According to the report of the World Gold Council, such indicators are caused by the recovery of the jewelry and technology sectors of the industry, as well as active purchases of gold by central banks. A significant increase in interest in the precious metal offset the decline that was observed throughout 2020 amid pandemic restrictions.
In particular, the annual demand for jewelry increased by 52% and amounted to 2,136.6 tons. The main factor was the recovery of the Indian economy in the second half of 2021, which led to an increase in interest in jewelry. Thus, last year sales of jewelry gold reached a six-year high - 611 tons (+93%).
In the investment sector, there was a mixed trend, as high global inflation competed with rising bond yields. However, despite a sharp increase in purchases (+118%) of gold in the fourth quarter, the final result of 2021 was a decrease in investment interest in the precious metal by 43%, to 1,007.1 tons.
Central banks purchased 463.1 tons of the precious metal last year, up 82% from 2020, when net purchases fell to a 10-year low.
The tech sector increased its gold purchases by 9% year-on-year to 330.2 tons. The main volume of consumption - 272 tons - traditionally fell on the production of electronics.
Note that the total volume of supply in 2021 decreased by 1% and amounted to 4,666.1 tons. The reduction was caused by an 11% decrease in refining volumes. At the same time, annual production increased by 2%, to 3,560.7 tons.
Gold is expected to face the same dynamics in 2022 as it did last year, with competing forces propping up and dragging down its performance. In the near term, the price of gold is likely to react to real rates, which in turn will react to the speed at which global central banks are tightening monetary policy and their effectiveness in curbing inflation.
“We expect a similar dynamic to impact gold performance in 2022 as demand drivers fluctuate based on the relative dominance of key economic variables. How central banks handle sustained high inflation will be a key driver for institutional and retail demand in 2022. Meanwhile, the current strength of the jewelry market could be undermined if new COVID options restrict consumer access again or continue if the economic recovery continues,” commented Louise Street, World Gold Council EMEA Senior Analyst.