Gold demand surges 34% in Q1 on geopolitical, economic uncertainty

According to the WGC ‘Gold Demand Trends Q1 2022’ report, global gold demand surged to 1,234 tonnes from 919.1 tonnes year on year during the January-March quarter supported by strong demand for ETFs



Global gold bar and coin demand was 11 per cent above its five-year average at 282 tonnes. However renewed lockdowns in China and high prices in Turkey contributed to a 20 per cent year-on-year decline, compared to the very strong Q1 2021. — File photo
Global gold bar and coin demand was 11 per cent above its five-year average at 282 tonnes. However renewed lockdowns in China and high prices in Turkey contributed to a 20 per cent year-on-year decline, compared to the very strong Q1 2021. — File photo
by

Issac John

Published: Thu 28 Apr 2022, 5:01 PM

Global gold demand jumped 34 per cent to 1,234 tonnes during the January-March quarter propelled by strong exchange-traded fund flows, reflecting the metal’s status as a safe-haven investment during times of geopolitical and economic uncertainty, World Gold Council said on Thursday.

According to the WGC ‘Gold Demand Trends Q1 2022’ report, global gold demand surged to 1,234 tonnes from 919.1 tonnes year on year during the January-March quarter supported by strong demand for ETFs.

“Geopolitical crises weighed heavily on the global economy and reinvigorated investor interest, pushing the gold price briefly to $2,070 an ounce in March, just shy of its all-time high. The global gold market saw a solid start to 2022, with first. quarter demand (excluding over the counter) up 34 per cent year-on-year, thanks to strong ETF flows, reflecting gold’s status as a safe-haven investment during times of geopolitical and economic uncertainty,” WGC said in its report.

Louise Street, senior analyst EMEA at the WGC, said the first quarter of 2022 has been a turbulent one, marked by geopolitical crises, supply chain difficulties and surging inflation. These global events and market conditions have solidified gold’s status as a safe haven holding, not just for investors but also for retail consumers thanks to its unique position as a dual-natured asset class.

“Given the current market dynamics, investment demand is expected to remain strong as the combination of high inflation and heightened geopolitical tensions will likely fuel demand for gold among investors. On the other hand, consumers are facing the global cost of living crisis, meaning many will reconsider how they spend their money. While consumer demand has been recovering from Covid-inflicted weakness, continued growth in jewellery demand could be stifled by rising costs and a general economic slowdown,” said Street.

Global gold bar and coin demand was 11 per cent above its five-year average at 282 tonnes. However renewed lockdowns in China and high prices in Turkey contributed to a 20 per cent year-on-year decline, compared to the very strong Q1 2021.

In the jewellery sector, global gold demand fell 7.0 per cent year-on-year to 474 tonnes, driven primarily by softer demand in China and India. Despite a strong performance in China over the lunar New Year period, this was later dampened by Covid outbreaks in February and March leading to strict lockdowns as China continues to follow its zero-Covid policy.

In India, a fall in the number of weddings and a lack of auspicious days in the first quarter had a direct impact on gold purchasing in the country. This, coupled with rising gold prices globally, prompted many Indian consumers to hold back on their purchases.

Gold demand in India, one of the traditional strongholds of the yellow metal, slipped 18 per cent in the March quarter to 135 tonnes against 166 tonnes logged in the same period last year, largely due to a sharp spike in prices. Jewellery demand plunged 26 per cent to 94 tonnes against 126 tonnes as consumers expect prices to fall after the resolution of the ongoing Russia-Ukraine conflict. However, investment demand surged five per cent to 41 tonnes (39 tonnes) as investors hedged their portfolio with gold on the back of surging inflation.

Somasundaram PR, Regional CEO (India), World Gold Council, said after rising to record levels in the December quarter, jewellery demand slipped below the 100 tonne mark for the third time in the last 12-years in the March quarter as prices surged.

Globally, the demand for gold in technology hit a four-year high of 82 tonnes, up 1.0 per cent in Q1 2021. While the sector saw modest growth, it was not free from challenges. Major financial and industrial hubs such as Shanghai were under renewed lockdowns, which impacted the electronics supply chain, the WGC report noted.

“Net buying by central banks more than doubled from the previous quarter, adding over 84t to official gold reserves during Q1 2022, with buying in the sector dominated by countries such as Egypt and Turkey. While 29% lower than Q1 2021, central banks continue to value gold’s performance during times of uncertainty,” it said.

Worldwide gold supply increased by 4.0 per cent year-on-year. This was driven by strong mine production, which hit 856 tonnes. In addition, recycling rose 15 per cent from the previous year, reaching 310 tonnes in response to higher gold prices.

— issacjohn@khaleejtimes.com


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