Gold Investment Weakest Since 2015 Price Lows
Friday, 1/28/2022 13:10
Selling from gold ETFs cut investing 43% in 2021...
GOLD INVESTING shrank last year to its lowest level by weight since the precious metal's bear market lows of 2015 according to new data today.
Figures compiled by specialists Metals Focus and published by the World Gold Council show heavy selling by shareholders in gold-backed ETF trust funds more than offset a jump in small bar and coin demand among 'retail' investors.
With the shock of the global Covid pandemic and lockdowns easing in 2021, "Demand for gold in the consumer-driven jewelry and technology sectors recovered throughout the year in line with economic growth and sentiment," says the mining industry-backed Council, "while central bank buying
also far outpaced that of 2020.
"[But] investment demand was mixed [as] high inflation competed with rising yields for investors’ attention. "
Gold investing demand fell across 2021 as a whole to a little more than 1,000 tonnes of bullion, the WGC's new fourth-quarter data said Friday.
That marks the smallest quantity of visible gold investment demand on the Council's current data series since 2015 – the year that gold prices bottomed as the US Federal Reserve discussed and then
finally raised interest rates following the global financial crisis – with the steepest drop since 2013, down 43.2% from
2020's Covid record total of more than 1,750 tonnes.
Within the 2021 total, small bar and coin demand jumped by almost 1/3rd, reaching its largest total since 2013's price crash. But as a group, shareholders in
gold ETFs worldwide last year liquidated almost 1/5th of 2020's record heavy inflows, reducing the quantity of bullion needed to back those products' value by 173 tonnes.
North American trust funds – led by the giant GLD traded in New York – shrank by 199 tonnes, UK and Eurozone funds were virtually unchanged, and Asian-listed ETFs expanded by 25 tonnes.
2013's massive outflows from gold ETFs – spurred by
the Fed discussing and then finally starting to 'taper' its monthly increase in QE bond holdings after the financial crisis – saw bullion's annual average price in Dollars sink by 15.4%. Last year in contrast saw gold set a fresh annual record, edging 1.6% above 2020's Covid Crisis level.
The US Fed is now tapering its Covid QE with a view to ending new bond purchases in March, when it also now looks certain to raise overnight interest rates from 0% as well.
But monetary policy today is "so historically accommodative," says bullion-bank HSBC's precious metals analyst James Steel, that
even the 2022 rate raises now widely expected from the US Federal Reserve will leave real interest rates "profoundly negative" versus inflation in the cost of living.
The risk of a steep stock-market correction – most especially if the Fed pushes ahead with tighter policy in the face of equities falling – also means gold could be used as a "safe haven" by investment porfolio managers, Steel added Thursday,
speaking on a webinar for members of trade body the London Bullion Market Association.
Looking ahead at 2022 investing flows, "We see a division in gold demand worldwide," Steel went on, explaining that "Inflation tends to motivate investors in Asia more than in Western markets."
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