Global investment demand for gold suffered a more than 40% drop in 2021, even as bar and coin demand climbed to an eight-year high and investment demand for the fourth quarter more than doubled, according to a report from the World Gold Council released Thursday evening.
“Investment demand was mixed in an environment of opposing forces: High inflation competed with rising yields for investors’ attention,” the report said.
Total gold investment demand, which includes bars, coins and gold-backed exchange traded funds, declined by 43% to 1,007 metric tons last year. Within that segment, annual bar and coin investment rose 31% to 1,180 metric tons — an eight-year high, while global gold exchange-traded funds saw outflows of 173 metric tons last year, a 5% fall in total holdings.
Total gold demand for the full year 2021, which includes investment, jewelry, technology and central-bank demand, rose by 10% to 4,021 metric tons, as fourth-quarter gold demand climbed by almost 50% to a 10-quarter high, the World Gold Council report said.
“While oftentimes gold’s behavior is linked to a few recurring drivers, such as interest rates or the dollar, the reality is that gold is multidimensional,” Juan Carlos Artigas, global head of research at the World Gold Council, told MarketWatch. “Despite gold ETF outflows, overall demand rebounded, buoyed by robust growth in bar and coin, technology, jewelry and central-bank demand.”
““Despite gold ETF outflows, overall demand rebounded, buoyed by robust growth in bar and coin, technology, jewelry and central bank demand.””
— Juan Carlos Artigas, World Gold Council
In the second half of last year, bar and coin investment “maintained good momentum, as high inflation readings across the globe kept investors focused on gold’s role as an inflation hedge and wealth-protection asset,” according to the report. “Interest in gold bars and coins was reportedly almost entirely one-way, with selling-back activity very limited.”
In the U.S., bar and coin investors bought a record 117 metric tons of gold in 2021, with annual demand up 69%. The U.S. Mint also reported its strongest year of bullion sales since 2009, selling a combined total of 1.252 million ounces of gold in Eagle and Buffalo coins, the report said.
Meanwhile, central banks accumulated 463 metric tons of gold last year, which is 82% higher than 2020. That lifted global gold reserves to a nearly 30-year high, it said.
While prices for the precious metal fell 4% during 2021, the average price of $1,799 an ounce for the year was around 2% higher than in 2020.
“Last year was a good example of gold’s dual nature. Its performance during 2021 — 2% higher on average compared to the previous year — reflects gold’s multiple purposes: from a key component in technology to a highly liquid investment hedge,” said Artigas.
On Thursday, prices for gold on the futures market settled lower, with the February contract GCG22, +0.16% at $1,793.10 an ounce, the lowest finish in roughly three weeks. April gold GCJ22, +0.15%, which has become the most active, settled at $1,795.