The World Gold Council (WGC) has revealed in its latest ‘Gold Demand Trends’ report that gold demand increased by 18% year-on-year in 2022, hitting a decade-high of 4 741 t.

WGC senior market analyst Louise Street tells Mining Weekly that demand for gold was propelled by hefty central bank buying and persistently strong retail investment, particularly in the fourth quarter.

Yearly central bank demand more than doubled to 1 136 t in 2022, which is a 450 t increase compared with 2021, and marks a new all-time record high.

Gold purchases in the fourth quarter alone reached 417 t, contributing to the 800 t that was bought in the second half of the year.

Street points out that gold remains steadfast in its status as a safe haven asset, particularly in times of crisis.

Moreover, Street says investment demand was also up 10% on the prior year, owing to a notable slowdown in exchange-traded fund (ETF) outflows and strong gold bar and coin demand.

Gold bars and coins continue to hold favour with investors in several countries, which helped to offset weakness in China – as the country implemented Covid-19 lockdowns throughout 2022.

The WGC reports that total European gold bar and coin investment for 2022 surpassed 300 t, which was aided by persistently robust German demand. There was also significant growth in the Middle East, where yearly demand increased by 42% year-on-year.

Jewellery demand softened slightly in 2022, down 3% at 2 086 t. This weakness was largely driven by the marked drop in Chinese yearly jewellery demand, down 15% as consumer activity was curtailed by lockdowns.

The gold price rally in the fourth quarter also contributed to the yearly decline in jewellery demand.

Total yearly supply in 2022 continued its gentle upwards trajectory, growing by 2% year-on-year to 4 755 t and remaining above pre-pandemic levels. Particularly, mine production increased to 3 612 t, which was the highest in four years.

Street points out that last year had the highest level of yearly gold demand in more than a decade, driven in part by colossal central bank demand for the safe haven asset.

“Gold’s diverse demand drivers played a balancing act as rising interest rates prompted some tactical ETF outflows, while elevated inflation spurred on gold bar and coin investment. In the end, overall investment demand was up 10% on the previous year.

“Turning to 2023, economic forecasts are pointing to a challenging environment and a likely global recession which could lead to a role reversal in gold investment trends. If inflation comes down, this could be a headwind for gold bar and coin investment.”

Conversely, she explains, continued weakening of the dollar and the moderating pace of interest rate hikes could have positive implications for gold-backed ETF demand.

Street expects jewellery consumption to remain resilient and bolstered by a release of pent-up demand as China reopens its economy following various Covid-19-related lockdowns across the country.

However, she adds that jewellery consumption may also be dragged down by the squeeze on consumer spending if there is a more severe downturn.

“While there are several possible outcomes, gold has a precedent for performing well in turbulent economic times, highlighting its value as a long-term, strategic asset,” Street concludes.