January 2022
Gold started the year high, supported by concerns about the long-term ramifications of the Covid-19 pandemic and associated supply chain disruptions. The Asia gold spot price in January averaged US$1892.59/oz, while the European gold spot price averaged US$1865.70/oz.

Although high, however, these prices represented a substantial drop from last year’s peak, when the disruption caused by the Covid-19 pandemic pushed gold prices above US$2000/t. The gold price proceeded to fluctuate throughout 2021 as the global economic recovery accelerated and slowed, the Delta wave hit, and central banks wavered regarding the pace of stimulus tapering.

In January, the US Federal Reserve was predicting the persistence of low interest rates into 2024, supporting the gold price. Low interest rates decrease the opportunity cost of holding non-yielding assets like gold, and thus boost their appeal. However, gold prices dropped through February and March as the global economic recovery accelerated faster than expected and the US dollar strengthened, decreasing the appeal of gold as a safe-haven asset and increasing its cost for the holders of other currencies, and as US bond yields went up, increasing the opportunity cost of holding non-yielding gold.

At the end of April and in May, gold prices rose again as the US dollar reversed and on the back of continuing massive government stimulus and global economic uncertainty. High inflation and dovish monetary policy from central banks pushed gold prices to a five-month high in May. Gold slumped again in June as the US dollar rose and the Fed turned more hawkish, signalling earlier-than-expected interest rate hikes, although interest rates were still expected to remain unchanged into 2023.

In August, despite a flash crash early in the month, gold prices only fell slightly thanks to a spike caused by dovish comments from the Fed. Gold dipped in September on the back of global economic recovery and then recovered in October, supported by uncertainty over the Fed’s tapering plans. Gold continued to rise and fall through November, influenced by central banks’ approaches to monetary policy. A hawkish turn by the Fed and projections of interest rate rises in 2022 caused gold to fall, then rise as the US dollar dropped. On Friday 17th December, the gold price rose again above the key US$1,800/oz level on the back of concerns about inflation and the Omicron strain of Covid-19.


Gold-backed ETFs lost out overall in 2021, with net global outflows of 167.4t, or US$8,803.1m. Losses were most marked in the March quarter, which saw outflows of 177.9t, primarily driven by negative flows from North American funds. European funds also saw substantial outflows, while Asian funds saw modest inflows. The outflows from North American and European funds reflected decreased investor demand for gold as US bond yields rose, increasing the opportunity cost of holding gold, and as the global economy rapidly rebounded. Negative flows also reflected the declining price of gold during this period.

Regional trends in ETF flows reversed in the June quarter, with gold flowing into North American and European funds and out of Asian funds, and with ETFs adding 40.7t globally. The inflows into North American and European funds were driven by the growth of the gold price over much of the period, although these positive flows continued even after the gold price weakened following hawkish comments from the Fed. Outflows from Asian funds were primarily driven by ETFs based in China, which in May had a strong local stock market.

Although they are not the primary source of global gold demand, ETFs have a disproportionate effect on demand trends because they are more volatile than larger sources of demand, such as jewellery. They were almost entirely responsible for the drop in demand seen in the September, when gold demand increased in almost every sector but nevertheless decreased by 7% year on year due to large ETF outflows. These outflows were themselves driven entirely by losses from North American ETFs, which lost 46.3t over the quarter on the back of declining gold prices.

During the same period, gold flowed into European and Asian ETFs. In Asia, inflows were driven by volatile local equity markets and slowing economic growth in China amid the power crunch and the Evergrande liquidity crisis, as well as by the drop in the gold price. Chinese gold-backed ETFs saw inflows of 3.4t in the September quarter as a result of these factors. Nevertheless, ETFs lost 26.7t globally. These global outflows continued into October, and in spite of modest global inflows in November, ETFs have continued to see overall outflows in the December quarter.

Central Banks

The Covid-19 pandemic and associated economic disruption have highlighted the role of gold as a safe-haven asset. In a survey conducted this year, central banks cited the asset’s “performance during times of crisis” as the top reason to hold it for the first time. Gold’s strong negative correlation with the US dollar has also made it an appealing asset to hold during the times this year when the US dollar has lost ground.

As a result, a number of central banks made large gold purchases in 2021, some for the first time in decades. Between May and June, for example, Singapore’s central bank increased its gold reserves by about 26.3t, marking its first gold purchase since 2000. Overall, central banks made net purchases of 95t in the March quarter, 191t in the June quarter, and 69t in the September quarter.

The quarter-on-quarter decline in gold purchases during the December quarter was primarily due to the relative absence of the substantial single monthly purchases made by central banks in the first half of the year. Stand-out single monthly purchases included the acquisition of 63t in March by Hungary’s central bank, which tripled the country’s gold reserves from 31.5t to 94.5t, and of 90.2t over April and May by the Central Bank of Thailand, which increased the country’s gold reserves by 60% to 244.2t. Hungary’s central bank cited pandemic-related risk, global spikes in government debts and inflation concerns as reasons for its adding to its gold reserves. Central Bank of Thailand Governor Dr Sethaput Suthiwartnarueput meanwhile, cited security, return, diversification and tail-risk hedging as factors in the bank’s decision. These factors helped bring global central bank gold acquisitions to 355t in the first three quarters of 2021.


Gold jewellery demand was consistently substantially higher year on year in 2021, reflecting the recovering global economy and the fact that jewellery demand, unlike ETF flows, is positively correlated with economic growth. However, demand remained consistently below pre-pandemic levels. This may be because the gold price remained relatively high, and jewellery demand tends to be inversely correlated with the gold price. However, it also reflected ongoing disruption in India, the world’s second-largest centre of gold jewellery demand.

After a strong recovery in global demand during the March quarter, primarily driven by China and India, the June quarter saw a smaller year-on-year increase, partly due to the emergence of the Delta variant of Covid-19. The Delta wave had a significant impact on demand due to its effect on India, which in the June quarter saw a 46% quarter on quarter drop in gold jewellery demand as the Delta wave shuttered jewellery shops, impacted wedding and festival demand, and raised economic concerns. Jewellery demand in India and elsewhere continued to recover in the September quarter, but slowing economic growth in China raised concerns about the country’s gold jewellery demand going forward.

Although demand rebounded significantly in 2021 from the lows of 2020, therefore, ongoing pandemic and economic concerns slowed its recovery.


Despite the easing of pandemic-related production issues from their peak in the June quarter of 2020, production at gold mines around the world was again impacted at the beginning of 2021 by the spread of Covid-19 and by the measures necessary to mitigate it. At Papua New Guinea’s Ok Tedi copper-gold mine, for example, operations were suspended for two weeks from 19th March, to halt the transmission of Covid-19 within its operations. The state-owned miner estimated that the halt would cost about US$59m in lost revenue.

Pandemic-related issues continued to decline through the middle of the year, however, and many gold miners saw increased profits on the back of high gold prices. Barrick Gold, for example, reported a 78% year on year surge in profits in the March quarter to US$507m due to high gold and copper prices. A number of gold mines commenced operations or were expanded or restarted this year, notably the Mt Todd mine, Australia’s largest undeveloped gold mine, containing more than 7.8Moz of gold. The mine’s operator, Vista Gold, received approval from Australia’s Northern Territory government to recommence operations at the mine in June. The mine had previously been on care and maintenance since 2006.

Modernisation work, including increased automation and a shift towards renewable energy, was carried out at a number of mines this year. Upgrades were implemented at Barrick Gold’s Kibali mine in the Democratic Republic of the Congo, the first underground operation built in the African nation. Reactive control of the enlarged battery installation is expected to reduce the need for back-up diesel generation, shrinking Kibali’s carbon footprint. New automation software for the underground haulage allows operators to control loaders from the surface. The mine is expected to produce 350-380koz of gold this year.

The second half of the year saw some Covid-related production disruption, with OceanaGold temporarily suspending operations at its Macraes and Waihi mines in New Zealand due to a Covid-19 lockdown. Safety issues were another cause of production cuts in the latter half of the year, with gold miner Sibanye-Stillwater revising its 2021 production guidance downwards by 19koz to 884-948koz after suspending operations at the Kloof 1, Beatrix 3 and Rustenburg Khuseleka shafts following a string of fatal accidents.

Looking Forward

As the global economy continues to recover and central banks pull back their stimulus spending and contemplate interest rate hikes, gold investment demand should continue to decline from the astronomical pandemic-driven highs of 2020. At the same time, demand for physical gold and especially gold jewellery should increase with increasing household incomes in the back of the global economic recovery.