Commodities

Fading ETF purchases will limit gold demand rise, Metals Focus says

Credit: REUTERS/KIM HONG-JI

Demand for gold from jewellers and central banks will recover in 2021 but remain below pre-pandemic levels, while buying of bullion by exchange traded funds (ETFs) will fall sharply, consultants Metals Focus said on Tuesday.

LONDON, June 15 (Reuters) - Demand for gold from jewellers and central banks will recover in 2021 but remain below pre-pandemic levels, while buying of bullion by exchange traded funds (ETFs) will fall sharply, consultants Metals Focus said on Tuesday.

Supply of gold from mines, meanwhile, will rise to its highest on record this year, Metals Focus said in its annual Gold Focus report.

It predicted that gold would cost on average $1,820 an ounce in 2021, up from $1,770 last year. On Tuesday, it was trading around $1,860 an ounce. XAU=

The novel coronavirus transformed the gold market.

Investors last year stockpiled huge amounts of the metal, traditionally seen as a safe place to store wealth, briefly pushing gold prices to record highs above $2,000 an ounce.

But jewellery sales collapsed and some central banks, facing economic difficulty, held off buying gold or even sold it.

Many larger investors pivoted back to riskier assets as vaccines were deployed and the global economy moved towards recovery, and ETFs, which store gold for shareholders, have shrunk.

However, smaller investors buying gold bars and coins have continued to stockpile, with Metals Focus saying it expected their purchases to rise to an eight-year high in 2021.

Supporting prices this year will be the threat of inflation eroding the value of assets and currencies, Metals Focus said. Gold and other commodities are often used as a hedge against inflation.

Following are Metals Focus's gold supply and demand numbers, measured in tonnes.

SUPPLY

2019

2020

2021(F)

%change 2020-21

Mine Production

3597

3478

3693

6%

Old Scrap

1272

1279

1209

-6%

Net Hedging Supply

6.175

20.31

na

Total Supply

4876

4757

4922

3%

DEMAND

Jewellery Fabrication

2138

1328

1815

37%

Industrial Demand

326

302.2

323.8

7%

Net Physical Investment

843.9

892.5

1166

31%

Net Hedging Demand

51.9

na

Net Central Bank Buying

606.2

262.3

420

60%

Total Demand

3914

2837

3725

31%

MARKET BALANCE

961.8

1921

1198

-38%

Net Investment in ETFs

398.3

886.8

80.4

-91%

Market Balance less ETFs

563.5

1034

1117

8%

Gold Price ($/oz)

1393

1770

1820

3%

*Source: Metals Focus

Global gold demandhttps://tmsnrt.rs/3wtrS3t

(Reporting by Peter Hobson; editing by Barbara Lewis)

((Peter.Hobson@thomsonreuters.com; +44 207 542 0083;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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