How was the year 2021 for Gold?

Mohammed Shaheen
The first half of 2021 provided a good example of how gold’s diverse sources of demand and supply interact. The gold price dropped by 6.6% in the first half, as gains during most of Q2 were thwarted by a significant pullback in late June. Gold’s price also underperformed in most key currencies except for the Japanese yen and the Turkish lira, which weakened against the US dollar.
Overall, gold’s performance was driven primarily by higher interest rates – especially during Q1 and then again in late June on the back of a more hawkish-than-expected statement by the US Federal Reserve. 2 Gold was also influenced by upbeat investor sentiment as the global economy started to recover from the impact of COVID-19.
However, there were supporting factors for gold. Concerns of higher inflation offset part of the drag that interest rates brought. And the strong response from governments to aid economic recovery in the form of monetary and fiscal policies has made some investors worried about currency risks and capital preservation. In addition, gold benefited from a recovery in consumer demand in Q1, although second waves of the virus and new lockdowns presented challenges in Q2. Our short-term model shows that these factors, combined with the effects of price momentum and investor positioning, help to explain the vast majority of gold’s performance year-to-date.
Gold prices will average a little above their current level of $1,830 an ounce for the remainder of 2021 before edging lower next year as the global economy recovers and central banks begin to tighten monetary policy.
Prices of the metal, traditionally seen as a safe store of wealth, surged to record levels above $2,000 an ounce early in the coronavirus crisis but sagged as economies reopened.

Q3 gold demand down 7% to 831 tonnes

Gold demand (excluding OTC) fell 7% y-o-y to 831t in Q3. This drop was almost exclusively driven by ETFs – which swung from very large inflows in Q3 2020 to modest outflows this year – overshadowing strength in other sectors of demand during the quarter. Jewelry, technology, and bar and coin were significantly higher than in 2020. Modest central bank purchases were a solid improvement on the small net sale from Q3’20. Supply was down 3% y-o-y due to a significant drop in recycling.
Jewelry continued to draw strength from the ongoing global economic recovery: Q3 demand rebounded 33% y-o-y to 443t.


  • Q2 average The y-o-y comparison shows a 6% fall, reflecting the August 2020 record-high US dollar price. Gold’s performance is consistent with its demand and supply dynamics and a macro environment of higher interest rates and risk-on investor appetite.
  • Year-to-date, gold demand is 9% lower A doubling of central bank buying and 50% growth in jewelry demand over the first three quarters only partly offset the decline in ETF demand.
  • Gold supply is flat- Mine production has steadily increased throughout 2021 and then the they-t-d total is up 5%, but recycling has slowed down significantly, contracting by more than 12% over the same period.
  • Our full-year 2021 outlook shows a picture similar to the year so farOngoing economic recovery will benefit jewelry and technology; investment should draw support from continued inflation fears but relatively modest ETF flows compare negatively with 2020’s record inflows. Central banks are poised for an above-average year of net purchases.

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