Gold Demand Hit 11-Year High in 2022 as Central Banks Scrambled for Acquisitions amid Global Economic Downswing

UTC by Tolu Ajiboye · 3 min read
Gold Demand Hit 11-Year High in 2022 as Central Banks Scrambled for Acquisitions amid Global Economic Downswing
Photo: Unsplash

2022 demand for gold swelled to a high not seen since 2011 on the back of vigorous buying by global central banks.

According to a CNBC report, gold demand surged to an 11-year high in 2022 following massive central bank purchases. The World Gold Council said that active retail investor buying contributed to the 18% increase in gold demand last year.

The demand for annual gold jumped to 4,741 tons (excluding over-the-counter or OTC trading) in 2022. This development represented the largest annual figure in eleven years, precipitated by a record Q4 demand of 1,337 tons. As the World Gold Council put it:

“Central bank net purchases in Q4 totaled 417t, lifting H2 total buying to 862t. Echoing Q3, data for the year’s final quarter was again a combination of reported purchases and a substantial estimate for unreported buying.”

2022 Central Bank Gold-buying Hit 55-Year High

In 2022, central banks purchased a 55-year high of 1,136 gold tons, with most of these purchases being “unreported.” Furthermore, last year’s surge in demand also marked a whopping 152% increase from 2021, when central banks purchased just 450 tons of gold. According to the World Gold Council, 2022’s demand spike is attributable to various unsavory macroeconomic factors, including geopolitical uncertainty and high inflation.

According to reports, gold investment demand increased by 10% to 1,107 tons. In addition, gold exchange-traded fund (ETF) holdings saw smaller outflows in 2022 than in the preceding year. Furthermore, jewelry consumption declined 3% last year to 2,086 tons. Much of this weakness came in the fourth quarter as gold prices rallied.

Meanwhile, the total annual gold supply grew 2% last year to 4,755 tons, with mine production attaining a four-year high of 3,612 tons. Commenting on the development, the World Gold Council stated:

“This marked a banner year for central bank buying: 2022 was not only the thirteenth consecutive year of net purchases but also the second highest level of annual demand on record back to 1950, boosted by +400t demand in both Q3 and Q4.”

Furthermore, the industry-backed group’s annual survey of policymakers revealed some critical drivers behind the need to hold gold last year. These key reasons included the precious metal’s “role as a long-term source of value” and “performance during times of crisis.”

Most of the central bank gold buying in 2022 came from emerging markets. Furthermore, CNBC reported that the largest buyer for the period was the Central Bank of Turkey, with 542 tons. In addition, China, Egypt, India, Iraq, Oman, and the UAE’s apex banks significantly boosted their gold reserves last year.

2022 Trajectory

Gold began 2022 on sure footing, swelling 12% through March, but eased off at the onset of Federal Reserve interest rate hikes. This fiscal development resulted in a strong dollar and the formation of significant challenges for the precious metal.

Gold value typically weakens amid rising interest rates and a strong dollar partly because of its US dollar pricing. This trend impacts the purchasing power of non-US buyers and harms global gold demand.

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