Gold has always had a high demand everywhere across the globe, and there are no signs that this precious metal will ever get out of demand in the future. This is because there’s a massive demand for gold jewelry and electronic parts made from gold.
Investors are among the most affected by changes in the demand for gold. Thus, trends in demand for gold should interest you if you are looking to put your money in gold. Gold prices get influenced by changes in demand and supply in the market.
Therefore, understanding the demand for gold can help you know the best time to invest. This blog post will look into everything you should know about the demand for gold. Read on to find out more about gold demand, how it impacts prices and what to expect in the future.
Let’s get started.
Why Is Gold in High Demand?
As mentioned before, gold has always been an in-demand asset. There are various reasons why this has been the case. Examples include:
- It preserves value better than many assets
- It provides a hedge against inflation
- It is perfect for portfolio diversification
- It provides security during geopolitical crises
- It is perfect for liquidity
Those are examples of the reasons why people invest in gold. It is perfect for wealth creation, and that makes it perfect for investment. But then, physical gold has proven to be more attractive to investors than other types of gold investments like Exchange Traded Funds (EFTs).
Physical gold like bars, coins, and jewelry are perfect investments. The fact that they’re tangible and easy to liquidate makes them attractive investments. So long as you find a reputable gold bar dealer like Acre, growing your investments will become almost effortless.
The bottom line is that gold will remain in high demand for as long as it provides value. It will remain an attractive investment that you can consider in 2022 and beyond. But then, almost everyone has a demand for gold, sometimes indirectly through electronics in the market.
Understanding Gold Prices
We have already said that gold demand impacts its prices. But then, there are many other factors that, together with demand, impact these prices. Let’s look into some of them.
Surge in Supply
There’s never been a massive global shortage of gold. There are large and plentiful gold mines available around the world. And technology has advanced, making it easier to refine gold. This means it will even be easier to increase the supply of gold in the future.
An increase in supply can help reduce the prices in the future. However, the sophisticated technology used in refining gold could escalate the cost of production. But then, the supply and demand curves usually intersect at some point and dictate gold prices.
Many other external factors determine gold prices in the market. For instance, governments and central banks impact the demand and prices of gold. These market conditions can make gold prices either attractive for investors or not; thus, you should look deeper at their impact.
This is also vital for investors venturing into new markets. Every government has specific that helps regulate the gold market. If you aren’t familiar with a specific market, take your time to study its regulations. That will help you understand the prices and avoid paying more for less.
How Does Jewelry Demand Impact Gold Consumption?
Gold jewelry has had a high demand over recent years. This demand has impacted the overall demand for gold across the world. According to research, China and India have emerged as the largest consumers of jewelry made from gold and other gold items.
The gold market declined in 2020 because of the economic and financial turmoil in the world around that time. These economies, China and India, will be critical in the recovery of this industry. High demand increases market prices and means more revenue for gold dealers in that market.
However, jewelry consumption may remain low in specific zones. These are especially areas that are yet to recover from the pandemic. This means that there may not be a lot of impact on demand and gold prices in these zones. That will only happen when those countries recover from the economic effects of the pandemic.
However, the world is fast opening up, and economies are slowly recovering. This means that it may not take long before the demand for gold across the globe rises again. You can expect to see the gold prices go slightly up and make the market attractive again for gold traders.
It is also worth noting that it is not only jewelry that will bring this impact. Gold is one of the materials used in making electronic parts of gadgets like smartphones. The high demand for such devices will see the demand for gold increase and impact current and future gold prices.
The Significance of Changes in Gold Prices
The change in demand happening in the gold industry is significant in various ways. One area it impacts, as said before, is the pricing of gold. Like other items, an increase in the demand for gold increases the price and makes it an attractive venture for sellers.
As an investor, the best time to get into the gold market is when prices drop. Once you find a good dealer, they can help you invest without having to break your bank. For instance, a dealer like Acre can help you invest flexibly and build your gold investments.
You can purchase gold bars of your preferred size, purity level, etc. One factor that should make it easy to decide what to purchase is your budget. It is vital to avoid financial strain when investing. Thus, you should ensure that the price you pay for your gold bars or coins is correct.
Also, it would be best if you kept a keen eye on changes in gold prices. The best time to invest is when prices are low. For instance, the pandemic presented a perfect opportunity for investors. Gold prices dropped as the demand went low because of uncertainty and financial challenges.
Another perfect time to invest is when there’s political turmoil. You can never separate gold from world politics. Thus, political challenges also impact the prices of gold in various countries. A crisis can cause the prices to drop, presenting a perfect chance for you to invest your money.
In short, there’s no specific time that’s best for investing in gold. The July-September quarter may be strong one year while only showing modest outflows the next. You have to learn the patterns in gold price changes to know when the best time for investment is. Also, you should know the best time to dispose of your gold and get the desired returns on your investment.
Future Demand for Gold
Something else you should keep an eye on as a gold investor is the industry’s future. It is vital to know what the future holds, especially in the demand and supply of gold. This will help you predict the direction that gold prices will take in the future and when the best time to invest.
As discussed before, you can expect a brighter future for the gold market in 2022. The demand will increase, and that will have a positive impact on gold prices. The industry suffered significant setbacks in 2020 when the pandemic ravaged the global economy, with lower gold prices mainly affecting investors. Thankfully, the strong recovery following falling COVID levels and rising vaccination rates has created enthusiasm for gold investments once again.
The best way to know what to expect in the future is to keep an eye on statistics. You don't need to be a senior market analyst or a regional CEO to understand the market. The World Gold Council is a significant resource for potential gold investors. It keeps track of the numbers and publishes them to help investors make informed decisions when investing in gold, whether it's third quarter reports or trends for the full year.
It also publishes forecasts to indicate what people can expect from this industry. This again makes it easier to decide what the best type of gold to invest in is, from coin investment to ETFs. You can consider checking these statistics if you are looking to invest in the gold industry in the future, keeping track of demand, ETF outflows and inflows, online purchases, and other important indicators of strong consumer interest. They’ll help simplify decision-making and save you a lot of time.
The demand for gold is one exciting topic for gold investors. If you are looking to invest your money in the gold industry, gold's strong rebound is worth keeping an eye on. Understanding its demand will help you keep track of gold prices and help you know the best time to buy or sell gold.
This post has provided an in-depth view of consumer sentiments and the demand for gold. It has looked into why gold has a high demand and how the overall gold demand impacts its prices. In addition, it has looked into the impact jewellery demand will have on gold investment demand, healthy bar and coin demand, gold ETFs, and other forms of gold demand.
Factors like the global economic recovery following higher vaccination rates and lower infection rates, increased economic activity for jewellery sales and weddings, and significant consumer interest following softer gold prices imply that gold demand will exceed last year's levels. Following the COVID-19 pandemic, gold may have a firm grip on the marketplace once again despite a year-on-year decline in the past.
You can use the insights shared in this article to kickstart your gold investment journey. They can help you, for instance, make informed decisions when investing in gold bars or predict the busiest gold-buying season in the coming year.
Visit Acre Gold for more tips on successfully investing in gold bars.
Jewelry demand will drive global gold consumption growth over next two years - report | Kitco
Exchange-traded funds (ETFs) | Money Smart