At the beginning of March, gold had reached an annual high of around $2,080 an ounce. Since then, the price has fallen nearly 15.8 percent through Thursday morning trading. This is the story of the yellow metal’s second quarter. Gold demand fell 8% this quarter, according to the World Gold Council’s quarterly demand trend report.
The slowdown in the second quarter was followed by demand growth of 34% year over year in the first quarter. In the first half of 2022, gold demand increased by 12%. According to the WGC, the main drivers of the gain were the Russian invasion of Ukraine and rising inflation.
Gold held in Exchange Traded Funds (ETFs) increased to a total of 273 tonnes (metric ton) in the first quarter of 2022, compared to an outflow of 174 tonnes in the first quarter of 2021. In the second quarter, gold-backed ETFs were added. 39 tons clearance. North American outflows totaled 42 tons in the second quarter and “concentrated among the largest and most liquid US funds and were driven by shifting expectations about the potential pace of US interest rate hikes.”
Demand for gold coins and bars in mainland China fell 35% year over year to 37 tons, after falling 43% to 49 tons in the first quarter. The first-quarter drop was caused by “a combination of a strong gold price rally and lockdowns imposed in various cities across China,” in a nod to the pandemic.
The WGC’s outlook for the second half of the year is mixed at best. Overall, asset demand, particularly from ETFs, is expected to remain essentially flat compared to demand for 2021, despite strong demand in the first half of the year. At the end of the first quarter, the WGC outlook called for asset demand for gold to increase by more than 200 tons annually.
The WGC noted that a “potential drop in inflation amid tightening of aggressive monetary policy” as well as a stronger dollar “could also create headwinds for investing via both ETFs and OTCs.” [over-the-counter] Market.”
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The good news, at least for the gold bug, is that weak equities and fixed income could create upside potential as a safe haven for gold in a recessionary environment. While commodity markets, particularly oil and copper, soften, commodities overall remain ‘uncertain and renewed’ [price] Spikes cannot be ruled out. ,
The gold outlook for 2022 also received a boost earlier this month when the WGC reported that in a survey of central bankers, 61% said they expect global gold reserves to increase this year. A quarter of respondents also said their own central banks would increase reserves this year.
Almost half (46%) of central banks buy their gold in the OTC market and 85% of the gold sold to central banks is in the form of bullion.
For the second quarter, mine production totaled 911.7 tonnes of gold from a total supply of 1,192.7 tonnes. Total supply increased 5% year over year for the quarter. Recycled gold added 12.6 tonnes and contributed 291.1 tonnes to total supply at the end of the quarter.
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Read more: Trade, Commodities & Metals, Economy, Investing, Central Banks, China, Commodities, Exchange Traded Funds, Fixed Income, Gold Prices, Inflation, Mining, Research, Ukraine