The COVID-19 pandemic, with its far-reaching effects, was the driving factor behind gold consumer demand weakness throughout 2020, leading to a 14% decline in annual demand to 3759.6t.
Last year was the first sub-4 000t year since 2009 according to the World Gold Council’s latest Gold Demand Trends report. Global gold demand dropped by 28% y-o-y to 783.4t in Q4, making it the weakest quarter since the midst of the global financial crisis in Q2 2008.
“The impact of the COVID-19 pandemic was felt across the gold market throughout 2020, and Q4 was no different,” said Louise Street, senior markets analyst for research at the World Gold Council. Gold jewellery demand in Q4 fell 13% y-o-y to 515.9t, resulting in a full-year total of 1411.6t, 34% lower than in 2019 and a new annual low for our data series. While demand improved steadily from the severely depleted Q2 total, the coronavirus continued to impact consumer behaviour.
Conversely, increased uncertainty and policy response to the pandemic supported annual investment demand, which increased 40% y-o-y to a new high for our series of 1773.2t. Most of the growth came in the form of gold-backed ETFs (gold ETFs) but was aided by bar and coin demand growth in H2. In addition, evidence suggests that over-the-counter (OTC) activity, which is not directly captured in our data set, was also robust throughout the year. However, in Q4 there was a notable decline in investment demand for gold ETFs with outflows totalling 130t.
Total annual gold supply also took a hit and was 4% lower y-o-y (4633t), the largest annual fall since 2013. The drop can be largely explained by coronavirus-related disruption to mine production, offset by a marginal 1% increase in recycling to 1297.4t for 2020. “Consumers around the world remained at the mercy of lockdowns, economic weakness and high gold prices, resulting in a new annual low in jewellery demand,” explained Street.
Inflows into global gold ETFs reached an annual record of 877.1t (US$47.9bn). An 11-month consecutive run of positive inflows starting in December 2019 came to a halt in November when a recovery in sentiment and gold price drop led to 130t of outflows in Q4. “Nevertheless, despite outflows in Q4, gold-backed ETFs saw record annual inflows due to low interest rates and high levels of uncertainty, highlighting gold’s role as a safe haven asset,” added Street.
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.
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 of 1 411.6t 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, 59% lower at 273t. Q4 saw a return to modest net buying: global official reserves grew by 44.8t during the quarter, more than reversing the 6.5t of net sales from Q3.
“Bar and coin demand also saw a strong recovery in the second half of the year, showing that retail investor sentiment remained relatively stable in these volatile markets. Overall, we believe the effects of the pandemic are likely to reverberate into Q1 2021, and possibly beyond,” concluded street.
 Consumer demand includes jewellery, and bar and coin demand. Gold demand includes jewellery, technology, bar and coin, gold ETFs and central bank demand, but excludes over-the-counter activity.