Gold demand hits highest level in more than two years

Rising inflation and the post-pandemic economic uncertainty has sent demand for gold to a two year high, according to the World Gold Council.

The organization’s latest report shows the appetite for the metal reached 1,147 tons in the last three months of 2021, its highest level since the second quarter of 2019 and an increase of almost 50 percent year-on-year.

Gold bar and coin demand rose 31 percent to an eight-year high of 1,180 tons, while the jewelry sector rebounded to match 2019’s pre-pandemic total of 2,124 tons.

For the twelfth consecutive year, central banks were net purchasers of gold, adding 463 tons to their holdings — 82 percent higher than 2020.

Central banks from both emerging and developed markets added to their gold reserves, lifting the global total to a near 30-year high.

Louise Street, a senior analyst at the World Gold Council, said: “On the investment side, the tug of war between persistent inflation and rising rates created a mixed picture for demand. Increasing rates fueled a risk-on appetite among some investors, reflected in ETF (exchange-traded fund) outflows.

“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.

“Declines in ETFs were offset by demand growth in other sectors. Jewelry reached its highest level in nearly a decade as key markets like China and India regained economic vibrancy.”

Street added that the World Gold Council is expecting demand to fluctuate in 2022, with how central banks deal with persistent high levels of inflation a key factor affecting the sector.

Likewise, the jewelry market’s strength could be hampered if new COVID variants once again restrict consumer access.