Gold-backed ETF holdings reached 268.8 tonnes or $16.6 billion in the first quarter of 2022, their best level since the third quarter of 2020.
This was driven by North America’s holding of 170.9 tonnes or $10.5 billion between January and March this year, according to data from the World Gold Council.
At the end of the fourth quarter of 2021, the holding of gold ETFs registered an outflow of 18 tons, that is, investors released their reserves and collected gold hedges, and due to the increase in uncertainty of this 2022, the preference for the gold as a safe-haven asset increased.
Ana Azuara, Raw Materials analyst at Banco Base, explained that “the price of gold could reach 2,000 dollars per ounce in the short term, firstly due to the war between Russia and Ukraine, due to a possible recession in the Russian economy, and second, due to the correlation with Europe, which could also drag the growth of that region”.
He added that “in addition, the issue of inflation causes an increase in the demand for gold as an asset to safeguard its value, not only as a refuge asset due to the issue of uncertainty, but also to be used as a hedge against inflation, which that supports gold being more in demand.”
The price of gold closed December 2021 at 1,831 dollars per ounce. It then hit a year high on March 8 at $2,043.30 and ended the first quarter of 2022 at $1,949.20 per ounce.
Between January and March of this year, gold registered a gain of 6.46% in its price.
As of the first quarter of 2022, North American investors reported gold-traded fund (ETF) inflows of about $10.5 billion, while Europe reported $6.9 billion, and Asia alone saw an outflow of $900 million, according to the World Gold Council.
Affects rate hike
Ana Azuara said that “the increase in interest rates by the United States Federal Reserve does lower the demand for gold, because no raw material earns interest, but gold is always used as a hedge against inflation.”
As Covid-19 cases increased in the first quarter of 2022, major cities in China implemented lockdown measures, affecting local gold consumption in March.
The World Gold Council commented that gold investment demand is likely to remain strong, price-sensitive elements of consumer demand may be negatively affected.
“Anecdotal evidence suggests that demand for gold in markets such as India and China has been affected by a combination of higher and more volatile prices, and the increase in cases of Covid-19 infections in the region,” it reads. your monthly report.
Ana Azuara specified that the new lockdowns in various cities in China, in particular, “in addition to impacting the demand for jewelry, generate pressure due to the issue of inflation, due to disruptions in the distribution chain. These are issues that will not be resolved quickly, just like the geopolitical tensions between Russia and Ukraine. ”.