Gold demand surged to an 11-year high in 2022 on 'colossal' central bank buying

Gold request soared to an 11-year precocious successful 2022 connected the backmost of "colossal cardinal slope purchases, aided by vigorous retail capitalist buying," according to the World Gold Council.

Annual golden request jumped 18% to 4,741 tons (excluding over-the-counter oregon OTC trading) crossed the year, the largest yearly fig since 2011, fueled by grounds fourth-quarter request of 1,337 tons.

Key to the surge was a 55-year precocious of 1,136 tons bought by cardinal banks crossed the year, the industry-backed radical revealed, noting that the bulk of these purchases were "unreported."

This marked a 152% summation from 2021, erstwhile cardinal banks bought conscionable 450 tons of gold, and the World Gold Council attributed the spike to geopolitical uncertainty and precocious inflation.

"Central slope nett purchases successful Q4 totalled 417t, lifting H2 full buying to 862t. Echoing Q3, information for the last 4th of the twelvemonth was again a operation of reported purchases and a important estimation for unreported buying," the WGC said.

"Should much accusation astir this unreported enactment go available, these estimates whitethorn beryllium revised."

Investment request for golden accrued by 10% to 1,107 tons, portion holdings of golden ETFs (exchange-traded funds) saw smaller outflows successful 2022 than successful the erstwhile year.

Jewelry depletion dropped 3% successful 2022 to 2,086 tons, with overmuch of the weakness concentrated successful the 4th fourth arsenic golden prices rallied.

Total yearly golden proviso inched 2% higher successful 2022 to 4,755 tons, with excavation accumulation notching a four-year precocious of 3,612 tons.

Central slope bulk buying

"This marked a banner twelvemonth for cardinal slope buying: 2022 was not lone the thirteenth consecutive twelvemonth of nett purchases, but besides the 2nd highest level of yearly request connected grounds backmost to 1950, boosted by +400t request successful some Q3 and Q4," the WGC said.

The group's yearly survey of policymakers revealed that the cardinal drivers down holding golden were its "performance during times of crisis" and its "role arsenic a semipermanent root of value."

"It's hardly astonishing past that successful a twelvemonth scarred by geopolitical uncertainty and rampant inflation, cardinal banks opted to proceed adding golden to their coffers and astatine an accelerated pace."

The bulk of the cardinal slope buying successful 2022 came from emerging markets, with the Central Bank of Turkey the largest purchaser astatine a grounds 542 tons. China, India, Egypt, Qatar, Iraq, the UAE and Oman each importantly boosted their golden reserves implicit the year.

'It whitethorn beryllium antithetic this time'

Despite a hard backdrop of accelerated hikes to involvement rates and a beardown U.S. dollar for overmuch of the year, the fourth-quarter resurgence was capable to spot golden prices eke retired a flimsy summation for 2022, with a 3% quarterly summation taking the precious metallic to a 0.4% yearly increase.

Gold typically weakens successful times of rising involvement rates and a beardown dollar, partially due to the fact that it is priced successful U.S. dollars contempt astir request originating from extracurricular the U.S., Wells Fargo highlighted successful a enactment past week. This means that the purchasing powerfulness of non-U.S. buyers is reduced and harms planetary golden demand.

Wells Fargo Head of Real Asset Strategy John LaForge besides noted that since golden is simply a non-interest-bearing asset, it becomes little charismatic to organization investors who tin bargain Treasurys and different interest-bearing assets erstwhile rates rise.

Gold started 2022 well, up 12% done March, but dropped disconnected erstwhile the U.S. Federal Reserve began aggressively hiking involvement rates to rein successful inflation, starring to a stronger dollar and forming important headwinds for the precious metal.

The spot golden terms is besides up much than 5% truthful acold successful 2023, trading astatine astir $1,926 per troy ounce arsenic of Wednesday morning. LaForge said that portion Wells Fargo presently holds a neutral presumption connected precious metals versus different commodities, the U.S. banking elephantine does not needfully expect mediocre performance.

Wells Fargo's year-end people scope remains $1,900 - $2,000, but LaForge said "it whitethorn beryllium antithetic this time."

"We whitethorn adjacent request to summation our year-end 2023 people scope should the U.S. dollar stay scope bound and we summation assurance that complaint hikes are adjacent their end," helium added.

Gold becoming 'very expensive' for consumers

James Steel, main precious metals expert astatine HSBC, said rising prices could yet statesman to compress request successful 2023 arsenic golden gets "very costly for consumers," particularly since astir 70% of buying is concentrated successful emerging markets.

"On the crushed buying — coins, bars, jewelry — is going to get progressively costly and this whitethorn precise good astatine slightest curb the rally, truthful I would surely beryllium cautious, and HSBC's campy is that the Fed volition support rates and not chopped them successful the 2nd fractional of the year," helium said.

"If that is realized arsenic 2023 unfolds past that could instrumentality immoderate of the oxygen distant from the golden marketplace arsenic well."