The Demand For Gold Hit It's Record High In 2022

According to the World Gold Council, demand for gold hit an 11-year high in 2022. This was due to a combination of factors, including low interest rates, increased investment demand, and ongoing economic uncertainty. The pandemic also played a role, as many investors sought safe-haven assets in the face of market volatility. Gold is a great way to hedge against inflation and build wealth over time and, as a long-term investment, it can provide significant returns. With the growing demand, it's a great time to look into investing in gold and consider how it could fit into your portfolio.

While gold demand in 2020 was not as high as 2011, it was still quite impressive. The World Gold Council reported that Central Banks’ large purchases, strong retail investor buying, and slowing outflows from ETFs all contributed to the overall demand for gold. This demand was higher than expected, given the extraordinary circumstances of the past year. The gold market has shown resilience and continues to be a key asset in many investment portfolios. The central banks' buying of 1,136 tons of gold in 2022 was the second-highest level of net purchases on record dating back to 1950, and the 13th consecutive year of net central bank gold purchases. This trend reflects a growing recognition among central banks of the important role that gold can play in diversifying their foreign exchange reserves and reducing their dependence on the US dollar.

Central banks added 417 tons of gold to their reserves in the fourth quarter of 2022, bringing the total in the second half of the year to 862 tons. This was due to reported buying by central banks in countries such as Turkey, India, Uzbekistan, and other emerging markets, as well as an estimate for significant unreported purchases. It's common for central banks such as China and Russia to not report their purchases, leading some analysts to believe that China is the mystery buyer stockpiling gold in order to minimize its exposure to the US dollar.

The People's Bank of China (PBOC) officially returned to the gold market after a two-year hiatus, reporting 62-ton purchases in November and December of 2022. This brought its total gold reserves to over 2,000 tons for the first time. The PBOC's renewed buying of gold highlights the importance that the central bank places on gold as a key component of its foreign exchange reserves, and its desire to reduce its dependence on the US dollar.

The World Gold Council cites two main drivers behind central bank gold buying: its performance during times of crisis and its role as a long-term store of value. This is why it's not surprising that in a year marked by geopolitical uncertainty and high inflation, central banks continued to add gold to their reserves at an accelerated pace. Additionally, investment demand for gold was strong in 2022, totaling 1,107 tons, which was a 10% increase from the previous year. The demand for gold bars and coins grew by 2% in 2022, building on the strong demand seen in the previous year. In total, global investors purchased 1,217 tons of gold bars and coins. The second half of the year was particularly strong for bar and coin buying, with two consecutive quarters of demand totaling around 340 tons, which was a first since 2013. This trend reflects a growing interest among investors in gold as a safe-haven asset, especially during times of economic and geopolitical uncertainty.

In summary, The WGC highlighted the diverse uses of gold across different sectors such as jewelry, technology, central banks, and investment, and explained how different parts of the gold market come to the forefront at different points in the global economic cycle. This diversity of demand and self-balancing nature of the gold market, according to the WGC, are key factors that support gold's robust qualities as an investment asset.