Gold rose over $100 per ounce in January, as the U.S. dollar continues to fall. Since the end of September, the U.S. Dollar Index is down over 10%, helping to push gold up nearly 20% and silver up 29%, even though silver is slightly down in January. This first month of the year has been a “gold only” rally among the precious metals, since the global economy has continued to be stalled, slowing the growth in the industrial metals (the Platinum Group and silver). The Federal Reserve is also meeting this week, and most analysts expect a small (0.25%) interest rate increase that may be their last of this cycle.
For the first nine months of 2022, as we have reported here, gold rose fairly well in terms of the euro, British pound and Japanese yen, due to a strong U.S. dollar, but gold was weak in dollar terms. That all turned around when the U.S. dollar began to fall in the fourth quarter due when the euro and yen began to raise rates, too Here’s how the metals have fared since the Dollar Index peaked in late September:
This trend should continue as the European Central Bank (ECB) plans to continue to raise rates even after the Fed may decrease rate raises after this week’s meeting of the Federal Open Market Committee (FOMC).
According to the World Gold Council Annual Report, Gold demand soared to an 11-year high in 2022 on the back of “colossal central bank purchases, aided by vigorous retail investor buying,” according to the World Gold Council.
Annual gold demand jumped 18% to 4,741 tons (excluding over-the-counter or OTC trading) across the year, the largest annual figure since 2011, fueled by record fourth-quarter demand of 1,337 tons.
Key to the surge was a 55-year high of 1,136 tons bought by central banks across the year, the industry-backed group revealed, noting that the majority of these purchases were “unreported.”
This marked a 152% increase from 2021, when central banks bought just 450 tons of gold, and the World Gold Council attributed the spike to geopolitical uncertainty and high inflation. Investment demand for gold increased by 10% to 1,107 tons. Total annual gold supply inched 2% higher in 2022 to 4,755 tons.
Central Bank Bulk Buying
“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.
The group’s annual survey of policymakers revealed that the key drivers behind holding gold were its “performance during times of crisis” and its “role as a long-term source of value.”
“It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”
The majority of the central bank buying in 2022 came from emerging markets, with the Central Bank of Turkey the largest buyer at a record 542 tons. China, India, Egypt, Qatar, Iraq, the UAE and Oman all significantly boosted their gold reserves over the year.