Bullion back by popular demand – report

The search for safe haven assets led to a rise in gold bar and coin purchases in 2021

A new report by the World Gold Council (WGC) has revealed that demand for the yellow metal increased to 4,021 tons last year. The growth was propelled by fourth-quarter demand, which jumped almost 50% to a 10-quarter high.

“Demand recouped much of the Covid-related losses sustained during 2020,” the WGC said.

Central bank gold buying has far outpaced that of 2020, surging 82% to 463 tons and thus lifting global reserves to a near 30-year high. The pace of buying slowed in the second half, with a 22% year-on-year decline in Q4.

According to the WGC data, demand for gold in the consumer-driven jewelry and technology sectors also recovered throughout the year in line with economic growth and sentiment. Jewelry growth was almost universal. “Gains were fueled primarily by the two global heavyweights – India and China – but decent recovery was also seen across all other regions.”

Meanwhile, global holdings of gold exchange-traded funds (ETFs) fell by 173 tons in 2021, in sharp contrast to 2020’s record 874-ton increase.

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“Gold’s performance this year truly underscored the value of its unique dual nature and the diverse demand drivers. On the investment side, the tug of war between persistent inflation and rising rates created a mixed picture for demand. Increasing rates fueled a risk-on appetite among some investors, reflected in ETF outflows,” said WGC Senior Analyst EMEA Louise Street.

On the other hand, she said, a search for safe haven assets led to a rise in gold bar and coin purchases, buoyed by central bank buying.

“Declines in ETFs were offset by demand growth in other sectors. Jewelry reached its highest level in nearly a decade as key markets like China and India regained economic vibrancy. We expect similar dynamics to influence gold’s performance in 2022, with demand drivers fluctuating according to the relative dominance of key economic variables,” Street noted.

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