Gold boosted by the war in Ukraine and inflation in the first quarter

Posted 28 April, 2022

Demand for the yellow metal stood at 1,234 tonnes, up 34% year-on-year, its highest level since the fourth quarter of 2018.

Demand for gold increased in the first quarter, boosted by professional investor appetite amid war in Ukraine and rampant inflation, reflecting the precious metal's safe-haven status.

Gold demand for the period was 1,234 tonnes, up 34% year-on-year, its highest level since the fourth quarter of 2018 according to the quarterly report of the World Gold Council (CMO) released Thursday.

"The invasion of Ukraine and soaring inflation were key factors driving up the price of gold and demand," the council explained in its report.

An ounce of gold had reached $2,070.44 in early March, close to its historic record of $2,075.47 reached in the summer of 2020, in the first months of the Covid-19 pandemic.

Proof of the interest of professional investors, index-linked products (ETFs) saw capital inflows equivalent to 269 tons of gold, or more than 1.7 billion dollars, "more than reversing the annual net outflow of 174 tonnes of 2021”, according to the CMO.

“The first quarter of 2022 was eventful, marked by geopolitical crises, difficulties in the supply chain, and galloping inflation”, summarizes Louise Street, an analyst within the organization. “These global events and market conditions have cemented gold's status as a safe haven.”

Physical investment in coins and bars totaled 282 tonnes, down 20% as the sharp rise in the price of gold led to profit-taking.

Jewelry demand also faltered in the first quarter, falling 7% from a year earlier, ending the growth seen throughout 2021.

Much of this weakness has come from China, which has faced an upsurge in Covid-19 cases since March, unprecedented since 2020 in its magnitude, and has thus introduced health restrictions to combat the epidemic.

In China and India in particular, weddings are an opportunity for families to save part of their savings by changing them into ingots, necklaces, rings, bracelets, and other gold objects, the ultimate safe haven.

A number of ceremonies have been postponed or canceled as a result, but high and volatile gold prices have also weighed on demand.

In addition, gold purchases by central banks decreased by 29% compared to 2021, standing at 83.8 tons.

Demand for gold in the technology sector increased slightly (+1%) to reach 82 tonnes in the first quarter.

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