Quo Vadis Gold 2020-2022

The spot gold price rose to a record $2,063/oz in August 2020, driven by investor demand amidst increased uncertainty and the global policy impact of to the pandemic. The record price, however, masked a 14% reduction in physical demand to 3,759.6t from 2019, which the World Gold Council says was due to “far reaching effects” of the pandemic.

Jewellery purchases were down 34%, or 515.9t, while smaller demand segments like gold coins and bars and technology, were also softer. Central banks bought only 272.9t of bullion in 2020, 59% less than the previous year.

These declines were partly offset by an increase of 34% year-on-year, or 877.1 tons, in gold-backed exchange traded funds, while annual gold supply dropped 4% to 4,633t the largest annual decline since 2013, as lockdowns disrupted mining activities.

The gold market remains volatile. In the first quarter of 2021, amid momentum in the global vaccine rollout and an improving economic recovery in the US and Europe, the spot gold price fell 8% from end of 2020 to $1,744/oz on 19 March 2021.

As at 29 March 2021 the Bloomberg average consensus gold price for 2021 is $1,794/oz and $1,700/oz for 2022.

While gold mining companies remain positive on the long-term prospects for the gold price, particularly as the threat of inflation increases, they will continue to use conservative assumptions when allocating capital, says Anglogold Ashanti.

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