April 2022 Market Update

Precious Metal Prices 

March ended with the gold price sitting at just under $1,925 per ounce, resulting in the best three-month return since June 2020 as investors continued to turn to the yellow metal driven by ongoing global political and economic tensions.

However, despite breaking through the crucial $2,000 barrier at various points during March, April opened at a price of $1,933.35 per ounce before retreating slightly. Nevertheless, by the middle of the month, highs of $1,975.25 were recorded once again as the continuing uncertainty surrounding the conflict in Ukraine dampened risk sentiment and drove investors towards safe-haven investment types such as gold, silver and platinum bullion coins and bars.

As the gold price edged closer to the $2,000 barrier, some analysts predicted a potential shift towards $2,100 in the coming months.

Silver experienced significant volatility throughout April, rising from an opening price of $24.69 to a high of $25.91 by the start of the third week. This increase of nearly 5% was short-lived, however, as the price fell back to $23.16 as the month ended.

Despite the increase in demand price rallies in recent months, the platinum market also closed at $915 on 28 April, a 7.46% decrease when compared to the start of the month and a decrease of nearly 25% when compared year on year.

Sanctions and Russian Gold 

In another attempt to influence political pressure with ongoing sanctions on Russia, US President Joe Biden signed an executive order that prevents any transactions from the U.S. with the Russian central bank’s gold reserves. This move was said to be valued at roughly US$130 billion and was designed to restrict Russia from trading gold reserves on the international market for other currencies or commodities, thereby mitigating further damage to the ruble which has been devalued by as much as 40% since the Ukraine conflict began.

Continued moves to distance international economies from Russian gold are likely to have a significant impact on the supply and demand of the precious metal. Russia is the second-largest gold-mining country in the world with more than 300 metric tonnes of gold being mined across the region each year. In 2020, Russia exported $18.7 billion of gold, the fourth largest export for the country, the vast majority heading to the United Kingdom.

However, for gold to be tradable on the UK bullion market, it must be deemed ‘good delivery’ – a distinction set by the London Bullion Market Association (LBMA) that requires the refinery which supplied the product to be on the ‘good delivery’ list, of which six Russian refineries previously appeared. This accredited status was revoked by the LBMA in early March, however, making trades of this gold more difficult.

Gold Demand Trends - Q1 2022

Driven by strong inflows into ETFs (Exchange Traded Funds), The World Gold Council reported a 34% increase in demand in gold in Q1 of 2022 when compared with the same period last year, something which was documented in their latest Gold Demand Trend report for Q1 of 2022. Key drivers behind this increase in demand were said to be surging inflation coupled with the ongoing political tension in Ukraine. It was also noted that during this period, the LBMA Gold Price gained 8%, which was said to be the best quarterly performance since Q2 of 2020. In addition, gold-mine production was 3% higher year on year which was due in part to an increase in activity in China as production was now nearing full capacity following a series of closures in 2021.

It was also positive news from an environmental perspective, as the supply of recycled gold jumped to 310 tonnes which was a 15% increase year on year and the strongest first quarter for gold recycling in six years.

However, increases were not seen in all sectors as jewellery consumption lost momentum in Q1 and demand was said to be down 7% year on year. This was attributed to a decrease in demand in both China and India, fuelled by tough new Covid-19 lockdowns in China, which had a marked impact on demand for jewellery, as well as coins and bars in the region.

Central Banks' Gold Holdings

The World Gold Council also released their updated figures for central banks’ gold holdings towards the end of April. Gold plays a vital part in reserves management for central banks as they are generally significant holders of the precious metal.

The latest data for March showed that, in contrast to previous months, holdings by central banks had reversed towards net sales following an increase in net purchases in February. Overall, holdings fell by 4 tonnes with Kazakhstan noted as the largest seller, reducing their reserves by 12 tonnes overall.

Following a pattern seen in recent months, Ireland again added to their reserves by purchasing 1 tonne. This means the Bank of Ireland is the fifth largest purchaser of gold in the world during Q1 of 2022, bringing their total reserves to just over 12 tonnes in total.

Asian Gold Demand  

Demand for gold in India is on the increase this month ahead of Akshaya Tritiya in early May, an annual festival that is considered one of the most auspicious occasions in the Hindu calendar. Demand over this important occasion has been lacking in previous years following a series of Covid-19-related lockdowns. However, retailers are predicting that interest will continue to rise this year ahead of the festivities.

Discounting, a popular tactic used to boost demand in the region, was reduced towards the middle of the month and sat at $12, a decrease from the $40 seen in previous weeks.

In China, discounting was also offered in an attempt to boost interest in precious metals, with some retailers selling gold at anywhere between a $3 discount and a $2 premium per ounce, as reported by Reuters. Demand in China is still low, however, due to ongoing restriction and lockdowns in some regions including Hong Kong and Shanghai.

Gold For Pensions

A recent survey by Pension Sage suggested that UK pension funds are increasingly beginning to recognise the diversification potential of gold within a balanced portfolio.

In their latest survey, the findings showed that nearly 40% of UK pension funds hold an allocation of gold. This demonstrates an increase from 31% of those surveyed in 2021. In addition, it was also suggested that this increase is not a temporary phenomenon as the gold holdings were described primarily as strategic, rather than tactical, with 39% of respondents suggesting that their allocation would likely increase over the next 12 months.

The Royal Mint

A recent announcement by The Royal Mint described plans to expand into the jewellery sector with the upcoming launch of ‘886’, a unisex jewellery collection crafted from sustainable gold.

Debuting in the Spring with 28 designs, the collection is designed by creative director Dominic Jones and celebrates the intrinsic value of the precious metal, as well as championing traditional British artistry and craft. “The 886 collection began with the idea of an institutional gold bullion that has been distorted, inverted and warped into a gentle, soft shape that feels like it floats off the skin,” he suggested. “I wanted to celebrate the inherent beauty of precious metal, without the distraction of stones or design flourishes. It’s very brave in its simplicity.”

Most notable perhaps is the news that the jewellery will be predominately crafted using gold recovered from discarded electronic waste. For this, The Royal Mint has announced a partnership with Canadian technology firm Excir and will use pioneering technology to extract and recover pure gold from discarded laptops, mobile phones and other electronics. A patented formula is said to recover over 99% of the gold used within these electronic devices which will seek to support a UK-based circular economy, as well as providing a fresh source of high-quality gold.