Gold’s supply and demand in Q1 2022

Gold's supply and demand

In the first part of our Q1 Gold Report, we highlighted Russia’s invasion of Ukraine and the uncertain market and economic conditions as key contributors to the 5.9% rise in the gold price over the first three months of 20221. We also reported on other significant macro factors and compared gold’s performance to other asset classes. In this second part of the Gold Report, we explore the various sources of supply and demand to further explain recent movements in the gold price.

Sources of gold demand in Q1

Source: World Gold Council, showing gold demand per market segment in Q1 2022.

Total gold demand of 1,234 tonnes in Q1 2022 was an increase of 7.2% from the previous quarter, which itself was a record after being revised upward to 24.7%. The positive momentum was sustained by strong inflows into gold ETFs, which had recorded a net redemption in the second half of last year, and central bank purchases. Demand from the other categories were lower quarter-on-quarter as bar and coin investments fell 12.5%, technology was 4.9% lower and jewellery demand dropped 28.0%. Total demand was 34.3% higher on a year-on-year basis.

Gold demand from the jewellery sector

Source: World Gold Council, as at 31 March 2022.

Jewellery fabrication was 517.8 tonnes for the quarter versus lower-than-expected 474 tonnes of demand, resulting in a build-up of inventories. A bumper Q4 2021 had been boosted by the release of pent-up demand built through the pandemic. The drop in demand this quarter was centred in the core markets of China and India due to lockdowns and fewer festivals respectively. Although jewellery has not fully recovered from the shock of the pandemic, demand has been surprisingly robust given the price appreciation of gold through the quarter.

Net purchasing of gold by central banks

Source: World Gold Council, as at 31 March 2022.

Central bank demand more than doubled in the quarter to 83.8 tonnes from 41.2 tonnes in Q4 2021; however, year-on-year demand was 28.7% lower and recent volumes remain significantly below the long-term average. Egypt and Turkey were the major purchasers in the quarter, but the biggest news was that the Central Bank of Russia was to begin buying gold. In 2020, the Central Bank of Russia suspended its long-running programme of buying gold to build its reserves. Latest data (January) shows the stock of Russian reserves as intact with the new instruction targeted to support domestic production.

Demand for gold via ETFs

Source: Bloomberg, as at 31 March 2022.

ETF demand was the key support to gold demand this quarter; 268.8 tonnes negated the total net sales (173.6 tonnes) of gold in 2021. The onset of military operations in Ukraine caused investors to invest in gold ETFs as heightened geopolitical uncertainty conflated with higher-for-longer inflation. North American funds saw inflows of over 170 tonnes in the quarter, the heaviest buying since Q3 2020 when gold hit its all-time high. European funds had their best quarter since Q1 2020 as funds there added 110 tonnes of gold. Marginally net selling in Asia can be explained by profit-taking and potentially liquidity needs, specifically in China.

Monthly flows into gold ETFs per region

Sources: Bloomberg and World Gold Council, as at 31 March 2022.

Supply of gold

Source: World Gold Council, as at 31 March 2022.

Quarter-on-quarter, gold supply was 6.4% lower, a total of 1,156.6 tonnes. The fall was due to a lower mined supply although in comparison to the average Q1 this has been one of the strongest starts to any year on record. Year-on-year, mined supply was 2.6% higher as the higher gold price did encourage production, which struggled against seasonal factors (operations typically close in the coldest climates) as well as events in Ukraine. Recycled gold supply was 3.7% higher quarter-on-quarter, again encouraged by higher prices but also potentially by liquidity needs in the face of higher living expenses. Lockdowns in China may have limited recycling activity as well. Producer hedging is estimated to have been a slight drag on gold available for supply, by around 10 tonnes.


  • 1Source: Bloomberg, LBMA Gold Price, in USD, for the period 31 December 2021 to 31 March 2022. Past performance is not a reliable indicator of future returns. 

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