Global demand for gold soared in the fourth quarter of 2021 as inflation rose, partly due to a backlog of weddings in India and Hong Kong, industry data released on Friday showed.
Viewed as a haven investment in times of economic unrest, gold saw demand surge 50% in the final three months of last year compared with the October-December period in 2020, the World Gold Council (WGC) said in a report.
Gold prices dropped 4% last year but the WGC said demand last year recouped much of the pandemic-related losses sustained in 2020, adding that total physical purchases jumped 10% to 4,021 tonnes.
“On the investment side, the tug of war between persistent inflation and rising rates created a mixed picture for demand,” Louise Street, a WGC senior analyst, said.
“On the other hand, a search for safe haven assets led to a rise in gold bar and coin purchases, buoyed by central bank buying.”
Expansion of 5G telecoms infrastructure should help support demand for gold in the sector, the WGC said, “but demand faces some risks from a slowdown in China as well as Covid-related restrictions”.
Gold jewellery demand jumped by more than half in 2021 on strong buying in India and China, as celebrations including marriages postponed by Covid-19 finally took place.
Elsewhere, global bar and coin investment reached an eight-year high. “Inflation concerns were a key driver, especially in the US and Germany, which both saw record annual demand,” the report said.
However global holdings of gold exchange-traded funds – that allow investment outside of futures market – fell by 173 tonnes in 2021, in “sharp contrast” to 2020’s record 874-tonne increase.
Central banks are raising interest rates to combat inflation. “How central banks deal with persistent high levels of inflation will be a key factor for institutional and retail demand in 2022,” Street said.
“Meanwhile, the jewellery market’s current strength could be hampered if new Covid-19 variants restrict consumer access again or continue if the economic recovery endures.”
- George Russell
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