Gold kicked off the new year better than it has in a long time. The precious metal is benefitting from extraordinary trends.

Demand for gold was stronger last year than it has been in more than a decade, the World Gold Council (WGC) said in its report on demand trends in the fourth quarter and the full year of 2022.

On Tuesday, the WGC also celebrated the 30th anniversary of its study on gold demand trends, which examines the cornerstones of physical gold market demand.

Record Demand

Overall, global gold demand, excluding OTC, rose 18 percent to 4,741 metric tons in 2022, almost the same amount as 2011, and the strong full-year result was supported by record demand of 1,337 tonnes in the fourth quarter.

The «exceptionally» high demand was due to «massive» buying by central banks and supported by strong retail investor buying and slower outflows from exchange-traded funds, according to WGC.

55-Year High

The second consecutive quarter of heavy central bank demand drove annual purchases in the sector to a 55-year high of 1,136 metric tons. In the year-end quarter, central banks bought 417 tons of gold, on top of the nearly 400 tons they acquired in the third quarter. As in the third quarter, most gold purchases were unreported.

Private Investors

Private investors also contributed to the demand boom, with global demand for bars and coins rising to a nine-year high of 1,217 tonnes, up 2 percent from a year earlier.

The second half of the year was particularly strong, with demand hovering around 340 tons for two consecutive quarters for the first time since 2013. The need for asset protection in a global inflationary environment remained a key motivator for purchasing gold, the report said.

Confident Sentiment

At the same time, gold exchange-traded fund (ETF) holdings declined less than they did a year, falling 110 tons compared to a drop of 189 tons. Total investment demand, not taking into account OTC activity, rose 10 percent last year to 1,107 tons.

For the current year, the WGC sees improved ETF demand, especially since interest rate hikes are likely to be less of a problem. However, central bank purchases are unlikely to return to 2022 levels, the industry association added. Continued dollar weakness, rising recession risks, and increased geopolitical risks would support gold.