Global gold demand up 34% in March qtr amid geopolitical uncertainty: WGC

Global gold demand jumped 34 per cent to 1,234 tonnes during January-March quarter, as investors flocked towards safe-haven investments during times of geopolitical and economic uncertainty, according to a World Gold Council (WGC) report.

According to the WGC 'Gold Demand Trends Q1 2022' report, global gold demand surged to 1,234 tonnes during the January-March quarter supported by strong demand for electronic traded funds (ETFs).

During the first quarter of 2021, global gold demand stood at 919.1 tonnes.

Geopolitical crises weighed heavily on the global economy and reinvigorated investor interest, pushing the gold price briefly to USD 2,070 an ounce in March, just shy of its all-time high.

The global gold market saw a solid start to 2022, with first quarter demand (excluding over the counter) up 34 per cent year-on-year, thanks to strong ETF flows, reflecting gold's status as a safe-haven investment during times of geopolitical and economic uncertainty, it added.

The report revealed gold ETFs had their strongest quarterly inflows of 269 tonnes since the third quarter of 2020, more than reversing the 173 tonnes annual net outflow from 2021 and driven in part by the rising gold price.

"The first quarter of 2022 has been a turbulent one, marked by geopolitical crises, supply chain difficulties and surging inflation. These global events and market conditions have solidified gold's status as a safe haven holding, not just for investors but also for retail consumers thanks to its unique position as a dual-natured asset class," WGC Senior Analyst EMEA Louise Street said.

Given the current market dynamics, investment demand is expected to remain strong as the combination of high inflation and heightened geopolitical tensions will likely fuel demand for gold amongst investors, she said.

"On the other hand, consumers are facing the global cost of living crisis, meaning many will reconsider how they spend their money. While consumer demand has been recovering from COVID-inflicted weakness, continued growth in jewellery demand could be stifled by rising costs and a general economic slowdown, she added.

Meanwhile, gold bar and coin demand witnessed a 20 per cent decline at 282 tonnes, compared to 352 tonnes in the same period of 2021, due to renewed lockdowns in China and high prices in Turkey, it said.

Turning to the jewellery sector, the report said the global gold demand fell 7 per cent year-on-year to 474 tonnes, compared to 538.7 tonnes in January-March quarter of 2021, driven primarily by softer demand in China and India.

Despite a strong performance in China over the lunar New Year period, this was later dampened by COVID outbreaks in February and March leading to strict lockdowns as China continues to follow its zero-COVID policy, the WGC report noted.

In India, a fall in the number of weddings and lack of auspicious days in the first quarter had a direct impact on gold purchasing, it noted.

This, coupled with rising gold prices globally, prompted many Indian consumers to hold back on their purchases, it added.

According to the WGC data, the demand for gold in technology hit a four-year high of 82 tonnes, up 1 per cent, from 81 tonnes in the first quarter of 2021.

While the sector saw modest growth, it also faced challenges like renewed lockdowns in major financial and industrial hubs such as Shanghai, which impacted the electronics supply chain, it said.

Net buying by Central banks more than doubled from the previous quarter, adding over 84 tonnes to official gold reserves during the first quarter of 2022, with buying in the sector dominated by countries such as Egypt and Turkey.

While 29 per cent lower than Q1 2021, which was 117.5 tonnes, central banks continue to value gold's performance during times of uncertainty, it said.

Total gold supply increased by 4 per cent year-on-year, driven by strong mine production, which hit 856 tonnes from 1,108.8 tonnes in the same quarter of 2021, the report said.

In addition, recycling rose 15 per cent in the previous year, reaching 310 tonnes compared with 269.3 tonnes in January-March quarter of 2021 in response to higher gold prices, it added.