By Yusuf Khan
Demand for gold reached its highest level in more than 10 years in 2022 as rising central bank interest rates and worries over the global economy pushed investors toward the precious metal, according to the World Gold Council.
Annual gold demand last year hit 4,741 metric tons - up 18% on year, and the highest annual total since 2011, the WGC l said Tuesday in a new report.
A record fourth quarter which saw demand hit 1,337.4 tons in the period alone, a 17% on-year increase, drove the rise, with high buying from central banks and strong retail investment key, the WGC said.
The annual average gold price also reached a record level of $1,800 a troy ounce based on London Bullion Market Association prices, driven by a fourth-quarter price rally, the WGC said.
Central bank buying alone more than doubled to 1,136 tons in 2022, up from 450 tons the year before - a new 55-year record high. In the fourth quarter alone, buying from central banks was 417 tons, bringing the total for the second half of 2022 to more than 800 tons, the council said.
A lot of central bank buying came from emerging markets looking to increase its holdings of gold during times of crisis, WGC senior analyst Krishan Gopaul said.
"In our central bank survey, what we were told as reasons to hold gold was its performance in times of crisis, that it's an effective diversifier and there's no counterparty risk," Mr. Gopaul said.
"If you look at last year, both the geopolitical and macroeconomic environment, you'll see that all of those factors as well as being a reason to own gold could be seen as reasons to buy more gold."
Most of the central banks that reported higher gold holdings were from emerging markets such as China--who reported a 62 ton increase from November to when? the end of 2022?--Turkey and Egypt who historically have held lower volumes compared with western banks, Mr Gopaul said.
"For Western central banks, who haven't been buying, because they already own a lot of gold the key point is they're actually not selling, " he said.
Meanwhile, investment demand--which excluded over-the-counter trading--was up 10% last year to 1,107 tons, led by strong gold bar and coin demand and a slowdown in exchange-traded fund outflows. Total European gold bar and coin investment for 2022 surpassed 300 tons alone, led by robust German demand. There was also significant growth in the Middle East, where annual demand increased by 42% on year, the WGC said.
Investment demand is expected to rise in 2023, with gold ETF and OTC buying likely to return on elevated recession and geopolitical risks while headwinds from rising interest rates slow, the council said.
Covid-19 lockdowns in China Chinese hampered jewelery demand, which softened 3% to 2,086 tons, the WGC said. "This weakness was largely driven by the marked drop in Chinese annual jewelry demand, down 15% as consumer activity was curtailed by ongoing Covid-19 lockdowns for most of the year," it said.
Mr. Gopaul noted that India saw a 17% drop in jewelry buying on year during the fourth quarter, with higher prices acting as a headwind. Any rebound in jewelry demand this year was likely to be localized to China following its reopening, he said.
Meanwhile, total annual supply in 2022 was up 2% to 4,755 tons, remaining above prepandemic levels, while mine production increased to 3,612 tons, a four-year high, the WGC said.
Write to Yusuf Khan at yusuf.khan@wsj.com
(END) Dow Jones Newswires
01-31-23 0114ET
