In a report released recently, the World Gold Council (WGC) said that demand for gold in the jewelry and bullion investment sectors increased by 33% and 18% year on year, respectively.
Over the same period, WGC said, global demand for the yellow metal still fell by 7% year on year.
WGC explains in this update published on October 28, 2021, that this underperformance is due to withdrawals from exchange-traded funds (ETFs) backed by the yellow metal (-27 tons).
Q3 demand by sector, tonnes*
As the economy recovers, investors are becoming less cautious and are abandoning their positions in gold as a way to preserve their assets in times of crisis.
As a reminder, the price of gold is influenced by the following factors:
Of these, inflation and interest rates seem to bear the most responsibility for the price of the yellow metal. Inflation, which everyone has been talking about lately, seems to be showing early signs of growth.
The continuous economic recovery will boost jewelry and technology; gold should profit from sustained inflation; nevertheless, relatively moderate ETF flows compare poorly to record inflows in 2020. Central banks are on track to make more net purchases than usual this year.
The official rate of consumer price inflation in the United States is +6.2 percent year on year, but the actual rate is substantially higher. If we employed the same price-level calculation methodologies as in the 1980s, the observed rise now would be considerably closer to +15 percent.
High inflation is a contributing factor to the price of gold and there is great potential for growth. In case of high inflation or a systemic crisis, you should buy physical gold.
Physical gold is one of the most trusted assets to hold for wealth preservation.
Gold held directly, outside the banking system, protects against the following risks:
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