28 January, 2021
Gold Demand Trends Full year and Q4 2020
Weak Q4 set the seal on an 11-year low for annual 2020 gold demand
The global gold market was ravaged by COVID-19 disruption throughout the year, while record high prices were a mixed blessing.
Fourth quarter gold demand of 783.4t (excluding over-the-counter – OTC – activity) was 28% lower y-o-y, making it the weakest quarter since the midst of the Global Financial Crisis in Q2 2008. The coronavirus pandemic, with its far-reaching effects, was the driving factor behind weakness in consumer demand throughout 2020, culminating in a 14% decline in annual demand to 3,759.6t, the first sub-4,000t year since 2009.
Gold jewellery demand in Q4 fell 13% y-o-y to 515.9t, resulting in a full-year total of 1,411.6t, 34% lower than in 2019 and a new annual low for our data series. While demand improved steadily from the severely depleted Q2 total, consumers across the world remained at the mercy of coronavirus lockdowns, economic weakness and high gold prices.
Bar and coin demand grew 10% y-o-y in Q4, pushing annual retail investment up 3% to 896.1t. Nevertheless, demand remained weak relative to the 10-year average (1,199.5t).
Despite 130t of outflows in Q4, gold backed exchange-traded funds (gold ETFs) saw record annual inflows: global holdings grew by 877.1t in 2020. In addition, evidence suggest that OTC activity, which is not directly captured in our data set, was also robust throughout the year.
Central bank buying slowed sharply in 2020, particularly in the second half of the year. Q4 saw a return to modest net buying (44.8t) after the prior quarter’s small net sale. Annual central bank purchases came to 272.9t (-59%) of which 86% was added in H1.
The technology sector, impacted by disruption from COVID-19, saw gold usage decline 7% in 2020 to 301.9t. But the year ended on a relatively positive note, with Q4 seeing marginal y-o-y growth to 84t.
Total annual gold supply of 4,633t was 4% lower y-o-y, the largest annual fall since 2013. The drop was largely explained by coronavirus-related disruption to mine production, offset by a marginal 1% increase in recycling to 1,297.4t for 2020.
Sources: Metals Focus, World Gold Council; Disclaimer
*Annual gold demand in 2020 was the lowest level of demand since 2009 (3,675.5t).
Note: Data as of 31 December 2020. For an explanation of gold market sectors, please see the notes and definitions download: www.gold.org/goldhub/data/gold-supply-and-demand-statistics.
The US dollar gold price returned 25% in 2020 supported by investor demand. After reaching a record high in August across most currencies, the LBMA Gold Price PM dropped back to US$1,762.55/oz at the end of November, before recovering to close the year at US$1,887.6/oz.
Inflows into global gold ETFs reached an annual record of 877.1t (US$47.9bn). Increased uncertainty and the policy response to the pandemic likely fuelled consistent inflows through October, before a recovery in sentiment and a drop in the gold price likely led to 130t of outflows in Q4.
Demand for gold bars and coins grew 10% in Q4. A recovery in China and India in the second half of 2020 added to continued strength in Western markets to lift annual demand to 896.1t (+3%).
2020 marked a record low for gold jewellery demand. Despite a quarterly recovery in Q4, demand was unable to overcome the continued challenges presented by COVID-19.
Gold buying by central banks slowed sharply in 2020, almost 60% lower at 273t. Q4 saw a return to net buying: global official reserves grew by 44.8t during the quarter, more than reversing the 6.5t of net sales from Q3.