Gold Nuggets: What Can We Learn From Recent History?

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2021 was a period of recalibration for gold — reverting toward longer-term trend levels among demand sectors, with the price seeking to consolidate at a higher base. Nearly three months into 2022, there are several reasons to remain optimistic about gold’s outlook.

Markets remain volatile as we grapple with ongoing effects of the pandemic and the Russia-Ukraine War, which continues to have devastating human impact. With so much uncertainty and non-linear market moves, gold remains top of mind as investors consider how to mitigate these risks. However, looking beyond some of the headlines, fundamentals for gold in 2022 remain robust. In this blog, we leverage some of the recent research from the World Gold Council to look at gold supply and demand trends in 2021 to see if those trends may continue into 2022 or, perhaps, improve.

In particular, I want to look at where there might be room for improvement on last year’s performance compared with the most recent period that might fairly be regarded as “typical”, the five years from 2015 through 2019, immediately preceding the onset of the COVID-19 pandemic. Let’s start with the demand side of the gold equation.

Global Gold Demand by Sector (Metric Tons)

We break gold demand down into four main categories: jewelry, investment, technology and central bank net purchases. Here, we’ll take a look at each of the categories, 2021 performance, and factors that may come into play in 2022.

Jewelry Demand Recovers

The pandemic hit the demand for gold jewelry very hard, the total for the full year 2020 falling about 50% in the face of widespread lockdowns and social distancing restrictions. Well over half of global jewelry demand is attributable to emerging market (EM) countries, the same countries that were hit early on by the pandemic and also applied the strictest lockdowns and social distancing rules. Small signs of an early recovery in jewelry demand became apparent in Q4 2020, and the rebound was confirmed in full-year 2021 statistics.

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