GOLD: Weak Q4 results in 11-year low for annual 2020 demand

The international gold market was ravaged by COVID-19 disruption throughout the year, while record high prices were a mixed blessing. The US dollar gold price returned 25% in 2020 supported by investor demand.

After reaching a record high in August across most currencies, the LBMA Gold Price PM dropped back to US$1,762.55/oz at the end of November, before recovering to close the year at US$1,887.6/oz. 

Gold demand in the fourth quarter of 783.4t (excluding over-the-counter – OTC – activity) was 28% lower y-o-y, making it the weakest quarter since the midst of the Global Financial Crisis in Q2 2008.

The coronavirus pandemic, with its far-reaching effects, was the driving factor behind weakness in consumer demand throughout 2020, culminating in a 14% decline in annual demand to 3,759.6t, the first sub-4,000t year since 2009.

Demand for gold jewellery in Q4 fell 13% y-o-y to 515.9t, resulting in a full-year total of 1,411.6t, 34% lower than in 2019 and a new annual low for our data series. While demand improved steadily from the severely depleted Q2 total, consumers across the world remained at the mercy of coronavirus lockdowns, economic weakness and high gold prices.

Coin and bar demand grew 10% y-o-y in Q4, pushing annual retail investment up 3% to 896.1t. Nevertheless, demand remained weak relative to the 10-year average (1,199.5t).

Despite 130t of outflows in Q4, gold backed exchange-traded funds (gold ETFs) saw record annual inflows: global holdings grew by 877.1t in 2020.

Buying by central banks slowed sharply in 2020, particularly in the second half of the year. Q4 saw a return to modest net buying (44.8t) after the prior quarter’s small net sale. Annual central bank purchases came to 272.9t (-59%) of which 86% was added in H1.

Impacted by disruption from COVID-19, the technology sector, saw gold usage decline 7% in 2020 to 301.9t. But the year ended on a relatively positive note, with Q4 seeing marginal y-o-y growth to 84t. Entire annual gold supply of 4,633t was 4% lower y-o-y, the largest annual fall since 2013. The drop was largely explained by coronavirus-related disruption to mine production, offset by a marginal 1% increase in recycling to 1,297.4t for 2020

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