Modern Mining January 2021

GOLD

Gold – safe-haven for investors during COVID-19 The coronavirus pandemic had a significant impact on gold demand in 2020, influencing different sectors of the market in different ways. However, Louise Street, senior mar- ket analyst at the World Gold Council, tells Munesu Shoko that investor demand for gold strengthened considerably throughout the pandemic, offsetting weakness elsewhere.

T hat the COVID-19 pandemic had a substantial impact on global gold demand in 2020 is no overstatement. To give an idea, global demand dropped by 19% year-on-year (y-o-y) to 892 t in Q3 2020, as consumers continued to feel the impact of the pandemic. This was the lowest quarterly total since Q3 2009. The year to Q3 2020 demand of 2 972 t was 10% lower compared to the same period in 2019, according to the World Gold Council’s Gold Demand Trends report. “Consumer demand dropped sharply and the jewellery market was hard hit: Q3 demand fell 29% y-o-y to 333 t. During Q3, many countries still had restrictions on people entering public places, such as shopping malls and jewellery shops, coupled with an overall reduction in consumer spending, with some people losing their main sources of income during lockdown. The weakness in demand for

Louise Street, senior market analyst at the World Gold Council.

Investment demand saw substantial growth as investors sought gold as a safe-haven. jewellery caused by COVID-19 was compounded by record high gold prices. While China and India accounted for the largest volume declines, weak- ness was global,” says Street. It was, however, encouraging to see demand in China begin to recover from the weak Q1/Q2 as the market emerged from lockdown and began to return to normal, although demand remained soft compared with 2019. Jump in investments Despite the decline in overall demand, Q3 saw sig- nificant growth in investment demand, which rose by 21% y-o-y. “The coronavirus pandemic had a sig- nificant impact on gold demand in 2020, influencing different sectors of the market in different ways: consumer demand was considerably weakened by market lockdowns, while investment demand saw substantial growth as investors sought gold as a safe-haven. Holdings of gold-backed exchange- traded funds (ETFs) reached a record level of 3 880 t in Q3,” explains Street. In fact, by any measure, gold-backed ETFs and similar products had a remarkable year in 2020, according to the latest report from the World Gold Council. Globally, gold ETFs had record annual net inflows of US$47,8-billion, or 876 t, collectively increasing their gold holdings by over a third, reach- ing all-time highs in tonnage (3 751 t). According to Price, investor demand for gold strengthened considerably throughout the pan- demic, as investors focused on gold’s role as a risk-hedge and means of wealth protection. Investor demand had already been on the rise prior to

There has been an increase in gold exploration in recent years, driven by gold miners having healthier balance sheets and the need to ensure an adequate project pipeline to replace aging assets.

26  MODERN MINING  January 2021