According to data from the World Gold Council (WGC), the Covid-19 pandemic’s negative effect on gold purchases looks like it ended in the first half of 2021 – it says that gold jewelry demand in China – a big consumer of bullion – more than doubled in the first half of 2021 year-on-year and reached pre-pandemic levels.
The same source asserts that this uplift in gold demand was repeated in Germany, where according to the WGC demand for gold bars and coins rose by 35% in the first half of this year compared to the previous six months. Negative interest rates in Europe are making non-yielding assets such as gold more attractive to buyers, who are also very nervous about inflation eroding the purchasing power of their fiat money.
As for inflation, which historically is associated with shortages – i.e. when the supply of money goes up much faster than the supply of goods and services – the supply-chain bottlenecks in all types of products (most obviously computer chips) could be with us well into 2022. The Baltic Dry Index, which measures the price of shipping raw materials globally, has more than tripled recently, as the supply of containers is constrained. German inflation in August was 3.9% compared to 3.8% in July; the harmonised index relevant for the European Central Bank jumped to 3.4%, from 3.1% in July.
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