According to the World Gold Council, the demand for gold last year was the highest seen in over a decade.
In a report by the council, it was outlined how central banks bought large amounts of gold supported by retail investor buying and slower exchange-traded fund (ETF) outflows increasing the annual demand by over 18 per cent compared to last year.
The report found that the international gold demand reached 4,741 tonnes this year and the demand for gold bars and coins grew by 2 per cent to 1,217 tonnes, while holdings of gold ETFs fell by a smaller amount than in 2021. Jewellery consumption also lowered by 3 per cent at 2,086 tonnes.
It also found that central banks bought 1,136 tonnes of gold worth around US$70 billion last year.
Graph via World Gold Council.
Gold plays a role in central banks’ reserves management and they usually own significant amounts of it because gold holds its value throughout rough financial times and doesn’t rely on any issuer or government.
Around two-thirds of the gold bought by central banks last year was not reported publicly, the WGC said.
During the Covid pandemic, gold buying decreased but went back up in the second half of 2022 with the banks buying 862 tonnes in July-December. Banks from Turkey, Egypt, China and Qatar were among those that purchased gold but around two-thirds of the gold bought by central banks last year was not reported publicly, according to the WGC.
Photo via World Gold Council.
The gold price closed the year with a marginal gain, despite facing notable headwinds from the strong US dollar and rising global interest rates. Although the Q4 average price was slightly weaker, a sharp November rally was followed by continued recovery throughout the year’s closing weeks.
The report noted that the strong growth in Europe, Turkey and the Middle East offset a sharp slowdown in China, where demand was affected throughout the year by COVID-related factors.
Indian consumer demand recovered and only just fell shy of the strong levels of demand seen during 2021. Continued recovery from the pandemic boosted yearly comparisons, although the sharp local price rally choked off demand in the closing weeks of December.
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“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,” WGC Senior Markets Analyst Louise Street said.
“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 per cent on the previous year,” said Street.
According to Street, this year’s 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 bars and coin investments.
“Conversely, continued weakening of the US dollar and the moderating pace of interest rate hikes could have positive implications for gold-backed ETF demand.”
Jewellery consumption will likely remain resilient, bolstered by a release of pent-up demand as China re-opens; but possibly dragged down by the squeeze on consumer spending if there is a more severe downturn,” Street explained.
“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.”
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Mine production grew 1 per cent in 2022 but remained below peak* Graph via World Gold Council
Last year, the annual gold supply increased by 2 per cent to 4,755 tonnes while mine production grew by 1 per cent. Some companies operating in North America and Latin America recently found positive results in their drilling programs and some expect to see higher production rates coming their way.
Vancouver-based company Calibre Mining Corp. (TSX: CXB; OTCQX: CXBMF) recently got positive assay results from the first phase diamond drill program at its Golden Eagle Project in Washington. The company found 4.30 g/t gold over 92.4 metres and 2.90 g/t gold over 195.1 meters from the Golden Eagle area which is located in Washington, United States.
Calibre‘s resource expansion and exploration drilling around its Nevada operation show growth and discovery potential which financial analysts at the investment banking firm Haywood Securities Inc. consider could lead to higher positive values for the company.
Previously, the company had reported additional high-grade drill results from its Panteon North zone within the Limon Mine Complex in Nicaragua.
Calibre Mining is a sponsor of Mugglehead news coverage
natalia@mugglehead.com
