Gold equalized everyone – Newspaper Kommersant No. 18 (7463) dated 02/01/2023

The record demand for gold in the world market in 2022, which reached 1.14 thousand tons for the first time in half a century, was largely provided by the central banks of various countries. In addition, interest in gold from private investors has grown. Moreover, the reasons for the actions of such different groups turned out to be similar – the desire to hedge against political uncertainty and inflation, as well as to get away from the dollar.

According to the data World Gold Council (WGC), according to the results of the fourth quarter of 2022, the demand for gold in the world market increased by 17% compared to the same period in 2021, to 1337.4 tons. Consumption was the highest in more than 30 years. At the end of 2022, the demand for gold increased by 18%, to 4,741 tons, the highest since 2011.

WGC data shows that at the end of last year, as well as in the second half of the year as a whole, the main reason for the growth in demand was the increased interest of financial regulators. Over the quarter, central banks purchased over 417 tons of metal, more than 12 times more than in the previous year.

In general, for the year they purchased almost 1136 tons, the maximum result in 56 years. At the same time, for the second year in a row, ETFs have been net sellers of metal, but if in 2021 they sold almost 190 tons, then last year they sold a little more than 110 tons.

The largest buyers of the metal were the central banks of Turkey (purchased 145 tons, bringing stocks to 542 tons) and China (in the fourth quarter reported an increase in stocks by 62 tons, to more than 2 thousand tons). Large-scale purchases were made by the central banks of Egypt (47 tons), Qatar (35 tons), Iraq (34 tons), the United Arab Emirates (25 tons) and Oman (2 tons). “One of the major factors behind the increase in gold purchases was the diversification of reserves, both due to a decrease in the cost of government bonds against the backdrop of tightening monetary policy by the central banks of developed countries, and inflationary risks,” says Alfa Capital portfolio manager Dmitry Skryabin. In addition, according to him, “the precedent with the freezing of Russian gold reserves also influenced the decision to increase the exposure in gold.”

The Bank of Russia pulled out of the trend and reduced the share of gold. After freezing half of the Russian gold and foreign exchange reserves, the Central Bank resumed buying gold on the domestic market from February 28, 2022. However, on March 24, the US Treasury imposed sanctions on any transactions of the Bank of Russia with gold. “Persons and companies directly or indirectly involved in transactions with the Central Bank’s gold or related to its transportation were also subject to sanctions. This led to the suspension of the purchase of gold in the Russian gold and foreign exchange reserves from March 15, 2022,” says Oksana Lukicheva, commodity market analyst at Otkritie Investments.

A high interest in the metal is also noted by individuals. Over the past year, investments in bullion and coins increased by 1,217 tons, the highest since 2013, more than 353 tons were purchased in the fourth quarter alone.

Among the growth leaders were Iran (growth by 16 tons, up to 41.8 tons), Turkey (growth by 23 tons, up to 84.8 tons), Egypt (growth by 2 tons, up to 4.4 tons). Russian private investors also found themselves in the general trend, increasing their investments by five times, from 5 tons to 25 tons (see Fig. “Kommersant” dated October 17, 2022). According to Valery Emelyanov, an expert on the stock market at BCS World of Investments, the main motive for individuals is the same as for central banks: to protect themselves from uncertainty in global politics, reduce the risks of owning the dollar, protect themselves from global inflation, and buy cheaper metal. “The Russians were strongly motivated by the fact that VAT was abolished when buying bullion. Plus, the authorities and the regulator diligently brought to the attention of the population the idea that the possession of dollars and euros is now dangerous,” said Mr. Yemelyanov.

In the current year, interest in the metal on the part of the main buyers will continue. “The remaining global risks of economic and geopolitical plans will contribute to the continuation of gold purchases,” Mr. Skryabin notes. But, according to Valery Yemelyanov, ordinary buyers and central banks have limited reserves now, so the volume of purchases will gradually decline this year.

Vitaly Gaidaev