Gold Demand 2023, page-2

5 out of 7 ain’t bad

The WGC has now tracked trends in gold demand through its report for 30 years.
According to an overarching analysis, the WGC has found gold performed positively in five out of seven previous recessions, with rising prices representing a 5.8% annual growth rate over the past three decades.
“Over the past 30 years the gold price has increased more than six-fold, from around US$330/oz when GDT was first published to US$1,814/oz by the end of 2022,” the WGC said.
“With a 5.8% annualised return over the period, gold has outperformed cash, bonds and commodities.
“Gold has also maintained a very low average correlation to stocks, even rising in times of turmoil and performing positively in five out of the past seven recessions, helping investors to reduce their portfolio losses.”
Central banks sold out of gold heavily in the 1990s and 2000s after the collapse of the Gold Standard.
Australia famously expunged around two-thirds of its gold reserves over six months in 1997, the RBA receiving $2.4 billion after whittling down its holdings from 247t to just 80t at an average price of only $450/oz.
Gold now attracts over $2700/oz in Aussie terms.
The worm has turned for bullion, with rising prices and geopolitical uncertainty encouraging central banks to add 6,815t between 2010 and 2022, much of it in emerging nations.
“And our most recent central bank survey shows that this appetite for gold continues; gold’s performance in times of crisis, its characteristic as a store of value over the long term and its high liquidity were all key reasons for central banks to hold gold,” the WGC says.
It follows trends that have seen fabrication for jewellery and technology, the main drivers of gold demand 20-30 years ago, lose market share to investment. They now make a healthy but smaller 44% share of net annual demand.
At the same time production has increased from 2270t in 1992 to 3612t at the end of 2022, with diversifying production aiding gold’s status as a low volatility asset given that unlike lithium, rare earths, iron ore and nickel production and consumption is not centralised in any one country.