April 06, 2022

LBMA Precious Metals Market Report: Q1 2022

From Inflation to Aggression

Despite the World Health Organization declaring on Saturday, 8 January, 2022 that the new COVID-19 Omicron variant was not ‘mild’, the principal influences on the gold price in the first part of the quarter were not the ongoing pandemic so much as fears of the negative economic impact of western world inflation. These concerns were, to some extent, countered by anticipation of a series of interest rate hikes by the US Federal Reserve and other central banks.

At the same time, traders were cheered by news of a 150+% rise in Indian gold imports, from $22bn in 2020 to $55.7bn in 2021, and by increased Chinese gold consumption (for example Swiss exports to China in January were 115,746kg, the highest since December 2016 and more than twice the figure for January 2021).

The first signs of what became the quarter’s dominant issue – the Ukraine crisis – appeared in press coverage of the third week of January, linking the gold price to what were first described as ‘Russia/Nato tensions’, and the massing of troops on the Ukraine borders.

During the period of 19 to 26 January, gold rose 1.5% from $1817.50 (AM) to $1845.20 (AM) before falling back on hopes of an early settlement to the crisis, and profit taking. Gold closed the month at $1795.35 (PM) a decline of 0.76% from the beginning of the year and in line with the average price ($1798.60) predicted for 2022 by LBMA’s Annual Precious Metals Forecast Survey 2022.

For the subsequent 26 trading days, the metal was on an upward trajectory, gaining $232.55 or 12.9% from the beginning of February, as the threat of a Russia Ukraine war became reality on 24 February, 2022. It peaked at $2039.05 (PM) on 8 March, 2022 — only $28.10 below its all-time high set in August 2020 in the height of the pandemic.

In line with international sanctions, LBMA moved quickly during this period to suspend three Russian banks (late February) and six Russian refiners (7 March, 2022) from membership.

To the end of March, the gold price was impacted by the first of the Fed rate hikes (and Chairman Powell’s comment that inflation was “too high”), increased volatility leading to higher margins on futures contracts, and periodic but vain hopes of a resolution to the conflict. That said, buying pressure remained as, in the words of the Financial Times, “Gold outperforms stocks and bonds as traders seek haven assets”. One indicator was the fact that whereas gold-backed ETFs shed $9bn worth of gold in 2021, the largest of them, SPDR Gold Shares, recorded input of $1.63bn on 21 January, 2022, alone.

In all, LBMA gold price rose $7.36% in Q1, 2022 from $1809.05 on 4 January to $1942.15 on 31 March. Average daily volume was 31.51m oz valued at $59.21. At 44.70m oz, 17th February saw the highest volume, while 8 March recorded the highest turnover at $90.6bn. During the same period, the S&P 500 Index fell 5.55%.

From Pandemic to War

% Moves in the London Gold Price 2020-2022
+27.73% (Jan 2020 to end-March 2022)

Whereas Q1 2022 average gold trading volume and value exceeded the 2021 average, silver posted lower trading numbers but recorded, at +8.41%, a higher price gain in the three-month period, responding in much the same way as gold to the Ukraine conflict.

In terms of price moves during the quarter, the standout performer was palladium. To the end of the first week of March, the quarter’s highpoint for all precious metals, palladium gained 78.6% from the beginning of the year, on fears of a major shortage, to hit an all-time high of $3339.00 per oz on 7th March. It ended the month at $2259.00, a 20.87% rise.

Key Statistics

Gold: 2021 Whole Year

Performance 4 Jan – 31 Dec -5.73%
Price High - 6 Jan $1957.20
Price Low - 30 Mar $1683.95
Low/High range 16.23%
Volume High – 17 Jun 52.6m oz
Value High – 17 Jun $93.5bn
Average daily volume 30.17m oz
Average daily value $54.28bn

Gold: Q1, 2022

4 Jan – 31 Mar +7.36%
Price High – 8 Mar $2039.05
Price Low – 28 Jan $1788.15
Low/High range 14.03%
Volume High – 17 Feb 44.70m oz
Value High – 8 Mar $90.6bn
Average daily volume 31.51m oz
Average daily value $59.21bn

Silver: 2021 Whole Year

Performance 4 Jan - 31 Dec -15.35%
Price High – 1 Feb $29.585
Price Low - 30 Nov $21.895
Low/High range 35.1%
Average daily volume 323.18m oz
Average daily value $8.21bn

Silver: Q1 2022

4 Jan – 31 Mar +8.41%
Price High – 9 Mar $26.175
Price Low – 7 Jan $22.240
Low/High range 17.69%
Average daily volume 316.22m oz
Average daily value $7.61bn