Gold Demand Surges in First Quarter

The comments below are an edited and abridged synopsis of an article by MarketCrash News Editors

Gold demand surged to kick off the year, up 34% year-on-year in the first quarter of 2022. Total demand came in at 1,234 tons in Q1, the highest quarterly demand since Q4 2018. Demand in the first quarter of this year was 19% above the 5-year average.

Gold Demand Surges in First Quarter - BullionBuzz - Nick's Top Six
Gold king chess piece stand on black background with copy space (Concept for leadership, unique, surging, demand)

Surging inflation and the Russian invasion of Ukraine were key factors driving demand. The gold price was up 8% in Q1.

Gold inflows into ETFs had their strongest quarterly number since the Q3 of 2020. Safe-haven demand fueled the 269-ton increase in ETF gold holdings. This more than reversed the 174-ton outflow from gold-backed funds in 2021.

Demand for gold coins and bars came in at 282 tons. That was 20% down from a strong first quarter last year, but it was still 11% higher than the five-year quarterly average.

While physical investment gold in the US and Europe were both strong, China was key to explaining the y-o-y decline. A drop in Chinese demand for gold bars and coins due to Covid lockdowns put a drag on physical gold investment there. Record gold prices in some currencies also resulted in profit-taking, particularly in Japan and Turkey.

Central banks globally increased their gold reserves by 84 tons. This doubled the increase from Q4 but was 29% down from the first quarter of 2020. Several central banks made large sales in Q1, pulling the net increase lower.

Demand for gold by industry rose by 1% year on year. It was the best Q1 for industrial gold demand since 2018.

While the technology sector has recovered somewhat from the pandemic, headwinds remain thanks to China’s draconian policies. Dozens of cities in China are under total or partial lockdown, with major industrial and financial hubs affected.

The World Gold Council expects investment demand to be higher this year than last year due to high inflation and geopolitical instability.

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