Demand For Gold Is Expected To Grow Exponentially In 2021

Demand for gold graph

The difference between physical gold investing and ETF investing was stark in the first quarter 2021 according to the World Gold Council’s Gold Demand Trends data released last week.

Before focusing in on investment demand below a few notes on overall gold demand in the first quarter.

Total gold demand in the first quarter of 2021 was down 4%. However, because gold production and gold demand (jewellery, bar and coin etc.) are decentralized around the globe, and no one ever has a complete picture of all transactions. So the WGC adds up all the known supply and demand. If measured demand does not exactly match measured supply, then there is an X factor added to demand, because in the end demand should always equal supply. In the first quarter this balancing X factor increased by a whopping 247% over the first quarter 2020.

 

Gold jewellery demand increased 52%, technology demand (electronics, dental, other industrial) increased by 11%. Central bank demand decreased by 23% and investment demand decreased by 71%.     

Taking a closer look at investment demand – physical gold demand (Total bar and coin demand) increased to 339.5 tonnes, while ETF sector had selling of 178 tonnes. The World Gold Council notes that both the total investment in bar and coins and ETF selling are the highest since 2016. So physical is hot while ETF is not.

Gold Investment Demand

An Alternative to Fiat Currencies?

Investment sentiment in exchange traded products faded on a rising US dollar, interest rates, and bitcoin. Analysis shows approximately 4.3% of the 10.4% decline in the gold price in the first quarter. This was due to rising US real interest rates, another 3.6% due to the rising US dollar, and 2.5% was due to the rise in bitcoin.

The negative correlation between gold and the US dollar and real interest rates is widely discussed among analysts. But the relationship between bitcoin and gold is now being closely analysed. As many investors have said that they see bitcoin and gold both as alternatives to fiat currencies. The gold price reached a new all-time high in August 2020. After which the sentiment started to change towards other asset classes, namely cryptocurrencies.

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Disclosure: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation ...

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