Will gold glitter in the new year?

Anecdotal evidence suggests that buying by consumers during Diwali in India, the world’s largest gold jewellery market, was strong Image: Narinder Nanu / AFP

Ask someone which asset class had a positive return in 2022 and the chances of getting a blank stare are high.

In a year when bonds and equities saw a synchronous fall, real estate was stagnant at best and cryptos saw a washout, few would realise that gold has given a positive return in 2022.

Since the start of 2022, rupee prices for gold are up 8 percent. With this, it has done what it is meant to do—provide a hedge to a portfolio. “Even in dollar terms, it is down 5 percent but when compared to equities, it has outperformed,” says Vikram Dhawan, head-commodities, Nippon India Mutual Fund.

The crucial question that investors would now ask is where does gold go from here? To answer that, one has to take a look at the last two years, which have been quite extraordinary for the precious metal.

In March 2020, when the first Covid lockdowns were announced in the West, global markets tanked and investors piled on to gold. In total, there were 900-1,000 tonnes of ETF buying worldwide. This is 25 percent of the total annual demand and has to be backed by physical gold. Traders scrambled for supplies and prices moved from $1,500 an ounce to $2,100 an ounce between March and June 2020 before demand adjusted lower.

Two sources of steady gold demand dried up in 2020. First, central banks in the West were focussed on saving their economies. They printed money through the year and buying physical gold took a backseat. Had central banks not intervened aggressively, it is possible that gold would have continued to outperform. Second, demand from consumers for jewellery also dried up.

Check Out: Rewind 2022: Year in Review


As a result, the year saw a 16.2 percent drop in demand to 3,651 tonnes compared to 2019, according to data from the World Gold Council. Demand by central banks slid 58 percent to 254 tonnes in 2020. Demand for jewellery declined 62 percent to 1,324 tonnes in 2020.

Fast forward to late 2022, and all signs point to gold prices moving north once again. The demand for jewellery is back, and central banks, after having unwound their pandemic stimulus, have also stepped up buying. Figures for 2022 are not out as yet but anecdotal evidence suggests that buying by consumers during Diwali in India, the world’s largest gold jewellery market, was strong.

Also read: Gold glitters as a safe haven amid global uncertainty

Add to that demand for physical gold in the Chinese New Year in February 2023. “Over the next few years, the floor will be provided by demand for physical gold and central bank demand,” says Dhawan.

One monkey off gold’s back is crypto. The fact that crypto has seen $2trillion of market cap get vapourised in the course of nine months has resulted in people, who have lost money trading crytocurrencies, relook at time-tested options that include gold. In addition, with the pandemic hedge getting unwound, demand for gold is now actual demand and not from spikes witnessed in the past.

Watch here: Rewind 2022: Year in Review All Major Events That Happened This Year

Last, there’s geopolitics. The war in Ukraine has taught investors to hedge their risks. That explains why, when the war broke out in February, the price spiked 17 percent to $2,000 an ounce in a month.

Since then the chart suggests that buying has been steady. With all cylinders—jewellery and central bank demand as well as demand for industry and bullion—expected to do well expect, gold prices to firm up further in 2023.