During the last month, gold prices climbed $169.30/oz to settle at $2,007.60 on April 6, 2023. Many believe the news reports on failing banks in the U.S. and Switzerland are motivating investors to seek safety in gold. These actions have also driven down the yields for bonds, which weakened the U.S. dollar, making gold more affordable for foreign buyers. This is also the first time gold prices have reached the $2,000/oz level since Russia invaded Ukraine a little more than a year ago. Gold prices rose from $1,850/oz to $1,925/oz during January. The yellow metal encountered a February swoon where prices dropped below $1,850/oz before the latest rally was initiated.
Shares of some of the largest gold producers, including Newmont, Barrick Gold and Kinross Gold, rallied during March. Exchange-traded funds (ETFs) have attracted investor attention as well. Investors were pouring money into gold ETFs during March at a rate not seen since April 2022.
Even though gold prices were flat last year, annual gold demand (excluding OTC) in 2022 increased by 18% year-on-year, hitting 4,741 metric tons (mt) – the highest annual total since 2011, according to the World Gold Council. Boosted by a record fourth quarter, demand for gold was propelled by hefty central bank-buying and persistently strong retail investment.
Annual central bank demand more than doubled to 1,136 mt in 2022, up from 450 mt the year before and to a new 55-year record high. Purchases in Q4 2022 alone reached 417 mt, bringing the total for the second half of 2022 to more than 800 mt.
Investment demand (excluding OTC) in 2022 was up 10% on the previous year. The increase was the result of two factors: a notable slowdown in ETF outflows and strong gold bar and coin demand.
Gold bars and coins continued to hold favor with investors in several countries around the world, which helped to offset weakness in China. Total European gold bar and coin investment for 2022 surpassed 300 mt, aided by persistently robust German demand. There was also significant growth in the Middle East, where annual demand increased by 42% year-on-year. Jewelry demand softened slightly in 2022, down 3% at 2,086 mt.
Inflation remains the wild card. A rate raise by the U.S. Federal Reserve to combat inflation could weaken gold prices.