Gold investment demand down over 40% in 2021, new report finds


Global investment demand for gold suffered a more than 40% drop in 2021, even as demand for bars and coins climbed to an eight-year high and investment demand for the fourth quarter more than doubled, according to a World Gold Council report released on Thursday Eve.

"Investment demand was mixed in an environment of opposing forces: high inflation competed with rising yields for investor attention," the report said.

Total investment demand for gold, which includes bars, coins and gold-backed exchange-traded funds, fell 43% last year to 1,007 tons. Within that segment, annual investments in bars and coins rose 31% to 1,180 tonnes -- an eight-year high, while gold exchange-traded funds saw outflows of 173 tonnes last year, a 5% decline in total holdings.

Total gold demand for full-year 2021, which includes investment, jewellery, technology and central bank demand, rose 10% to 4,021 tonnes, while gold demand climbed almost 50% to a 10-quarter high in the fourth quarter, according to the World report It's called the Gold Council.

"While gold's behavior is often associated with some recurring driver such as interest rates or the dollar, the reality is that gold is multidimensional," Juan Carlos Artigas, global research director at the World Gold Council, told MarketWatch. “Despite outflows from gold ETFs, aggregate demand rallied, supported by robust growth in bars and coins, technology, jewelery and central bank demand.”

"“Despite outflows from gold ETFs, aggregate demand rallied, supported by robust growth in bars and coins, technology, jewelery 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 numbers around the world focused investors on gold's role as an inflation hedge and wealth preservation investment," according to the report. "Interest in gold bars and coins has reportedly been almost entirely one-way, with very limited sell-back activity."

In the US, bullion and coin investors bought a record 117 tons of gold in 2021, with annual demand rising 69%. The US Mint also reported its strongest year in bullion sales since 2009, selling a total of 1.252 million ounces of gold in Eagle and Buffalo coins, the report said.

Meanwhile, central banks amassed 463 tons of gold last year, up 82% from 2020. That pushed global gold reserves to a nearly 30-year high, they said.

While prices for the precious metal fell 4% over the course of 2021, the annual average price of $1,799 an ounce was around 2% higher than in 2020.

“Last year was a good example of gold's dual nature. Its performance in 2021 - up 2% on average year-on-year - reflects gold's multiple purposes: from a key component in technology to a highly liquid investment hedge,” said Artigas.

Gold prices settled lower in the futures market on Thursday, with the February GCG22 contract up 0.25% at $1,793.10 an ounce, its lowest end in about three weeks. April Gold GCJ22, +0.26%, which has become the most active at $1,795.


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