Talk about a heafake: with everyone expecting Powell to be super hawkish during his presser, imagine everyone’s shock when Powell repeatedly – over and over – avoided and ignored, on purpose, every opportunity to be even remotely as hawkish as he could have been, and as a result we saw risk assets explode higher. Of course, that sparked a fresh round of even more laughable kneejerk reactions from much of Wall Street, with the cognitive bias and dissonance of so many bears so glaringly obvious.

New Edge Wealth

“The more the Fed leans against rate cuts, the more markets will price in rate cuts as a scenario that the Fed must catch up on the other side of much lower inflation. .. as that process goes on,.. equities can rally.. the January rally shouldn’t be faded.”

Jeff Rosenberg, portfolio manager at BlackRock

“there’s real disconnect between what the Fed statement and Powell said on the one hand, and what markets heard on the other. Powell flubbed the question about whether the easing in financial conditions hurts the Fed’s work. It absolutely matters.”

Peter Tchir, Academy Securities

“I think we can now “safely” say the Fed is just about done hiking (and done hiking if I’m right on the data). Today we rally. We remain above key technical levels, and hearing a lot of chatter that people will pile into weekly call options on anything that moves (seems plausible)… I’m now at finger tapping the table bearish on risk and more or less neutral on rates (not all the way to pounding the table bearish, but up from mildly bearish – which was clearly wrong).”

Omair Sharif of Inflation Insights

“Not sure I get this obsession with a ‘couple’ of more rate hikes as being dovish. I thought it was dovish after I read the statement! The change in the inflation language in the statement combined with the change in the language from ‘pace’ to ‘extent’ suggested that they were debating when to pause and indicated that 5.1%, which was the median dot for 2023 in the December SEP, was the ceiling, barring any big changes in the data.”

Roger Hallam, head of rates at Vanguard

“The bond market has extrapolated chair Powell’s more balanced tone to think there is a pause coming soon. That is not what he said today, with at least a couple more hikes to come,” and “he did raise the prospect of doing more if the data was stronger.”

Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office:
“As expected, the Fed raised rates by 25 basis points as the debate for investors has shifted from the size of hikes to when they will no longer be ongoing. Despite the market’s initial reaction, it seems like the hike was priced in for the most part as we see a slight step back from January’s bear-market rally. Remember that while inflation may have peaked, easing isn’t the same as evaporating. And with each month that passes, the Fed may be getting closer to pausing rate hikes, but that’s not the same as pivoting to rate cuts. Investors should likely prepare for the possibility that the volatility that dominated last year could re-emerge — even if 2023 turns out to be an improvement from 2022.”

Finally, here is Bloomberg’s AI assessment of Powell’s statement which is clearly the most dovish in about a year.

* * *

As usual, the only thing to kneejerk almost as fast as stonks after the FOMC statement release, is the barrage of bite-sized comments from the strategist/economist peanut gallery. And since today is no difference, with the digital ink on the FOMC statement still wet so to speak, here is the first barrage of sellside reactions.

Omair Sharif of Inflation Insights

“The FOMC statement was more dovish on inflation, albeit still cautious, but the one word change from the ‘pace’ of future rate hikes to the ‘extent’ of future hikes tells you that when the Minutes come out, we’ll likely read that officials have begun to debate when to pause. “It seems that the market is taking this as somewhat hawkish because the Fed actually plans to follow through and get to 5.00%-5.25% on the funds rate as opposed to market participants’ hope that perhaps this would be the last hike. No such luck, but I think acknowledging that inflation has moderated somewhat and signaling that the ‘pause’ debate is underway is dovish.”

Ben Jeffery at BMO Capital Markets says:

“Biggest takeaway from the FOMC statement, along with the widely-expected 25 bp rate hike, was that the Fed opted to leave ‘ongoing’ within the formal language and indicated that there are more tightening moves to be realized this cycle.”

Priya Misra at TD Securities says

“So far slightly hawkish message — inflation has eased but remains elevated. They hiked 25bp and likely will hike a few more times in their base case. Should move front end rates higher. Not good for risk assets so long end might keep a bit of a bid. Focus on whether Powell talks about his current view on the terminal rate and fin conditions at the presser.”

Dennis DeBusschere, of 22V Research

“As always, wait for the press conference, and in particular, how much Powell focuses on pain. The need for the economy to take some pain, or not. At the last meeting, he was very pain-focused.”

Avery Shenfeld, chief economist at CIBC Capital Markets

“Nothing to see here, folks.” But the retention of “ongoing increases” guidance could be, essentially, an effort to address the easing in financial conditions: “That could be an effort to push the bond market towards higher yields in the here and now.”

Childe-Freeman, Bloomberg Intelchief G-10 FX strategist, says keep looking

“The dollar is up marginally on the Fed’s confirmed hawkish bias, but this could prove a short-lived bounce, as there’s nothing particularly new here and nothing to alter what remains a dollar-negative narrative this year.”

Neil Dutta, Renaissance Macro

“Interesting change in the second-to-last paragraph. They took out ‘public health’ when discussing ‘assessments will take into account a wide range of information…’ — Lines up with Biden’s ending of the public health emergency. I know it is coming in May, but nonetheless.”

John Bellows, Western Asset

“There is only so much Powell can say to push back on the divergence between markets and the Fed.”

developing

With traders buzzing about Powell’s shocking reincarnation of Arthur Burns as he steamrolled over the ghost of Paul Volcker again and again as he sent risk exploding higher and undoing all the Fed’s hard work since Jackson Hole, let’s not forget that after the close today we get earnings from one of the gigacaps when Facebook Meta reports Q4 results.

So for those focusing on micro even when macro is all the rage, here is a preview of META’s earnings courtesy of JPM TMT trader Ron Adler.

MEGACAP TECH (META, GOOGL, AMZN) – Earnings remain a focus as we play our two favorite games, “What are the bogeys?” and “What’s priced in?” Cost cutting and competition are thematically relevant for the group. META is the cleanest story, given the comps and lack of cloud dynamics, and they’re the furthest along on costs. GOOGL provided some hope on cost-cutting comments a few weeks ago. However, the number of tangible levers they seem willing to pull to drive profitability remains in question, while AI and regulatory weigh further. AMZN has many moving parts, but all eyes remain on AWS; this print seems like a clearing event. Regarding preference, I like META > AMZN > GOOGL into this week. See below for more thoughts on the META, GOOGL & AMZN setups. 

• META – Remains a top idea for many given cost rationalizations, lapping IDFA comps and investments bearing fruit. The bear case really hasn’t changed (Competitive threats, saturated user base, overearning core biz, platform changes and obstinate mgmt).
• EXPECTATIONS – Q4 Revs -4% (vs. guide -3-11%) & Q1 Guide -3%. F23 Expense Guide trimmed to ~$95B at midpoint (vs. current $97B). Reports 2/1, Implied 10.7%

And here is Goldman (courtesy of traders Callahan and Bartlett)

META…Meta reports Wed post close. We have as a 7 on “1-10” positioning scale. With stock now +26% ytd and +74% off of  November lows, and the feedback we hear from most skewing more positive since the stock bottomed, it’s hard to argue this hasn’t become a popular long again. Investors expect Q4 Revenue beat vs. consensus, and looking for another cut to FY23 OpEx and/or CapEx guide.  Options implying a 9% move. 

For the META results, joins us just after the close.

After some initial volatility, US equity markets are charging higher…

…and bond yields lower…

After Fed Chair Powell appeared to shrug off the fact that financial conditions have dramatically loosened recently…

Specifically, Powell noted that financial conditions have tightened very significantly over the past year, and that “it is important that overall financial conditions reflect” monetary policy (which they don’t), but added that “our focus is not on short-term moves, but on sustained changes” to financial conditions.

Additionally, gold is extending its gains…

This is anything but the ‘hawkish’ rhetoric the market was expecting.

As usual, the only thing to kneejerk almost as fast as stonks after the FOMC statement release, is the barrage of bite-sized comments from the strategist/economist peanut gallery. And since today is no difference, with the digital ink on the FOMC statement still wet so to speak, here is the first barrage of sellside reactions.

Omair Sharif of Inflation Insights

“The FOMC statement was more dovish on inflation, albeit still cautious, but the one word change from the ‘pace’ of future rate hikes to the ‘extent’ of future hikes tells you that when the Minutes come out, we’ll likely read that officials have begun to debate when to pause. “It seems that the market is taking this as somewhat hawkish because the Fed actually plans to follow through and get to 5.00%-5.25% on the funds rate as opposed to market participants’ hope that perhaps this would be the last hike. No such luck, but I think acknowledging that inflation has moderated somewhat and signaling that the ‘pause’ debate is underway is dovish.”

Ben Jeffery at BMO Capital Markets says:

“Biggest takeaway from the FOMC statement, along with the widely-expected 25 bp rate hike, was that the Fed opted to leave ‘ongoing’ within the formal language and indicated that there are more tightening moves to be realized this cycle.”

Priya Misra at TD Securities says

“So far slightly hawkish message — inflation has eased but remains elevated. They hiked 25bp and likely will hike a few more times in their base case. Should move front end rates higher. Not good for risk assets so long end might keep a bit of a bid. Focus on whether Powell talks about his current view on the terminal rate and fin conditions at the presser.”

Dennis DeBusschere, of 22V Research

“As always, wait for the press conference, and in particular, how much Powell focuses on pain. The need for the economy to take some pain, or not. At the last meeting, he was very pain-focused.”

Avery Shenfeld, chief economist at CIBC Capital Markets

“Nothing to see here, folks.” But the retention of “ongoing increases” guidance could be, essentially, an effort to address the easing in financial conditions: “That could be an effort to push the bond market towards higher yields in the here and now.”

Childe-Freeman, Bloomberg Intelchief G-10 FX strategist, says keep looking

“The dollar is up marginally on the Fed’s confirmed hawkish bias, but this could prove a short-lived bounce, as there’s nothing particularly new here and nothing to alter what remains a dollar-negative narrative this year.”

Neil Dutta, Renaissance Macro

“Interesting change in the second-to-last paragraph. They took out ‘public health’ when discussing ‘assessments will take into account a wide range of information…’ — Lines up with Biden’s ending of the public health emergency. I know it is coming in May, but nonetheless.”

John Bellows, Western Asset

“There is only so much Powell can say to push back on the divergence between markets and the Fed.”

developing

For the last six weeks, since the prior FOMC meeting, the market has ignored every Fed Speaker’s hawkish jawboning against the market’s “unwarranted easing” of financial conditions in the face of The Fed’s “higher for longer” narrative.

After the expected 25bps hike and a mixed basket from the statement, the market, simply put, expects a ‘hawkish’ Powell in rhetoric but believe he and his pals are ‘all bark, and no bite’.

So, is it possible that Powell can deliver a Jackson Hole 2.0-esque conference call that the market will believe… or have animal spirits taken over?

Watch live here (press conference due to start at 1430ET):

Tl;dr: The Fed hiked 25bps as fully expected and the statement had 3 key highlights:

1. Hawkish – keeps “ongoing increases” (plural) language signaling no pause in March.

2. Small Dovish – adds inflation “has eased somewhat” but notes “remains elevated.”

3. Dovish – Changes “pace” of future increases with “extent”, as it transitions from the rate of hikes to the duration of higher rates before any pivot.

As Inflation Insights suggests:

“The one word change from the ‘pace’ of future rate hikes to the ‘extent’ of future hikes tells you that when the Minutes come out, we’ll likely read that officials have begun to debate when to pause.”

While everyone expects a ‘hawkish’ rhetoric from Powell in the presser, we suspect it won’t be ‘hawkish’ enough.

*  *  *

Since the last FOMC meeting on December 14th, a lot has changed for markets. While the dollar is lower and bonds are flat; gold, stocks, and crypto have all rallied strongly in an ‘easing’-like move…

Source: Bloomberg

…but not a lot has changed for the market’s view of the Fed’s rate-trajectory (in fact, they have shifted hawkishly since the actual FOMC day close)…

Source: Bloomberg

But while rate expectations have drifted hawkishly, financial conditions have eased dramatically, equivalently erasing 100s of bps of rate-hikes and QT along the way….

Source: Bloomberg

Additionally, in case you were hoping for the ‘soft’ landing, since the last FOMC meeting, the labor market has dramatically outperformed expectations while ‘soft’ survey and ‘hard’ industrial data has significantly weakened (and perhaps today’s ADP disappointment gives us a glimpse of reality… not weather)…

Source: Bloomberg

Finally, before we get to the fun and games, bear in mind that there is no SEP (dotplots) today, so Powell will be on his own to jawbone any rate-trajectory expectations (which for now remains massively more hawkish than the market…

Source: Bloomberg

As the FOMC statement hit, the odds of a 25bps hike in March were 79% and 46% for another 25bps in May…

So what did The Fed do?

The Fed hiked rates by 25bps to the 4.5%-4.75% target range.

The key sentence was unchanged (leaving “increases” (plural) in is hawkish)…

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

This language suggests The Fed is inclined toward quarter-point rate hikes at next two meetings in March and May, rather than toward a pause after March.

There was a very modestly dovish nod to the progress:

Inflation has eased somewhat but remains elevated.

Finally, in a dovish changes, The Fed nodded toward ‘duration’ of higher rates as opposed to ‘how high’:

…will consider “extent of future increases,” a slight change from the prior language on the “pace” of hikes

The market is anticipating Powell to be ‘hawkish’ in the conference call… but believes his rhetoric is ‘all bark and no bite’ – we shall see.

As Dennis DeBusschere, founder of 22V Research noted:

“As always, wait for the press conference, and in particular, how much Powell focuses on pain. The need for the economy to take some pain, or not. At the last meeting, he was very pain-focused.”

Read the full redline below:

Authored by Dave DeCamp via AntiWar.com,

The US is preparing another major escalation of military aid to Ukraine as Reuters reports the next arms package will include rockets that have a range of 94 miles (150 km), almost double the range of the munitions Ukraine was provided for the HIMARS rocket systems.

Citing two unnamed US officials, Reuters said that the US will provide Ukraine with the longer-range Boeing-made Ground Launched Small Diameter Bomb (GLSDB) for the first time as part of an over $2 billion arms package that could be announced as soon as this week.

The officials said that the GLSDB will be provided under the Ukraine Security Assistance Initiative (USAI), which allows the Pentagon to purchase arms for Ukraine. Weapons provided under the USAI could take months or years to deliver as they involve contracts and might need to be manufactured.

But Boeing has been preparing for months to make the GLSDBs for Ukraine. Reuters first reported in November that the US was considering sending the munitions to Kyiv and said they could be available by the spring. The system has been in development since 2019 and combines small-diameter bombs with the M26 rocket motor, which is widely available in US military inventories.

Sending the longer-range weapons risks provoking Moscow and comes after a series of new aid pledges for Ukraine that included the Bradley Fighting Vehicles and M1 Abrams tanks for the first time. Each escalation of aid brings the US and Russia closer to a direct conflict, which could quickly spiral into nuclear war.

The new weapons package is expected to include $1.725 billion in USAI funds that will go toward the GLSDB as well as HAWK air defense systems, counter-drone systems, counter artillery radars, communications equipment, PUMA surveillance drones, and spare parts for Patriot air defense systems and Bradleys.

The package might also include $400 million for the Presidential Drawdown Authority, which allows President Biden to send Ukraine weapons directly from US military stockpiles. The drawdown package will likely include mine-resistant ambush-protected vehicles (MRAPs), guided multiple launch rocket systems (GMLRS), and other ammunition.

What a coincidence: just yesterday we presented the latest report from UBS economists showing that the job openings “data” collected and presented by Biden’s Department of Labor is at best wrong (and at worst, manipulated propaganda meant to make the labor market appear stronger than it is), and that the reality is far worse than the BLS suggests, with real openings down 30% from the March 2022 peak and only 25% higher than the 2019 average.

Of course, this latest confirmation that the Bureau of Labor Statistics is making up data as it goes along comes at a time when the Philly Fed showed that the Biden admin’s payrolls number was overstated by over 1 million in Q2 2022, and that the number of layoffs was far higher than the DOL shows, as Goldman calculated.

So faced with a difficult choice: either come clean about the real labor numbers – now that US corporations are averaging one mass layoff announcement every 45 minutes – or just double down and keep reporting increasingly bigger lies, the Biden admin’s labor department has sadly but predictably decided to do what it does best by picking option two, and as today’s latest JOLTs report shows, it intends to keep digging and making the hole ever bigger.

To wit: after job openings dropped modestly for the previously two months into the waning months of 2022, in December (recall JOLTS is one-month lagged to the NFP report), and completely out of the blue,  job openings exploded by a massive 572K, the most since July 2021 when the US was indeed on a crazy hiring spree, and pushing total job openings to just above 11 million, the highest since July 2022.

This was the fourth consecutive beat of expectations in the series, and an unprecedented 12 of the past 13 prints, just another garden variety six-sigma event by the “never political” BLS.

According to the BLS, in December, the largest increases in job openings were in accommodation and food services (+409,000), retail trade (+134,000), and construction (+82,000). The number of job openings decreased in information (-107,000). Ah yes, the neverending hiring spree of waiters and bartenders: the key anchor of every solid economy…

The latest surge in job openings means that after a two month break, there are once again 5.3 million more jobs than unemployed workers, not that far off from the all time high of 5.9 million in March 2022.

Said otherwise, there were 1.92 job openings for every unemployed worker, up from 1.74 last month. Needless to say, this number has a ways to drop to revert to its precovid levels around around 1.20…

And while job openings unexpectedly soared, the BLS finally noticed what we had been discussing in recent months, namely that after hiring inexplicably tumbled in recent months to the lowest since February 2021, in December it spiked higher surging by 131K to 6.165MM, the highest since August 2022. More importantly, the jump in hiring took place as quits declined, and finally the two series have converged after mysteriously diverging for much of the past two years.

Incidentally, it was the drop in quits – traditionally know as the “take this job and shove it” indicator as it reflects confidence that a worker can find a better paying job elsewhere (or else they wouldn’t quit voluntarily) – that attracted the attention of the WSJ’s Fed mouthpiece Nick Timiraos who specifically noted the drop in the quits rate to 2.9% from 3.0% in Nov and 3.3% a year ago.

Job openings rose to 11 million in Dec, sending the ratio of vacancies to unemployed workers up to 1.92 from 1.74 in Nov and 1.81 a year ago

But private sector quit rate (a sign of churn) ticked down to 2.9% in Dec from 3% in Nov and 3.3% one year earlierhttps://t.co/dkVcGipsXE pic.twitter.com/KP96mns1to

— Nick Timiraos (@NickTimiraos) February 1, 2023

So what to make of this ‘data’ which as not only UBS, but also the NFIB…

… and Opportunity Insights…

… discredit as fake news?

The answer is simple: well over half of it – or some 70% to be specific – is guesswork. As the BLS itself admits, while the response rate to most of its various labor (and other) surveys has collapsed in recent years…

… nothing is as bad as the JOLTS report where the actual response rate has tumbled to a record low 30.6%!

In other words, more than two thirds, or 70% of the final number of job openings, is estimated!

And at a time when it is critical for Biden to maintain the illusion that the labor market remains strong when everything else in Biden’s economy is on the verge of recession, we’ll let readers decide if the admin’s Labor Department is plugging the estimate gap with numbers that are stronger or weaker.

Update (1230ET):

Adani Enterprises pulled its $2.4 billion follow-on public offer (FPO) of shares after US short-seller Hindenburg Research unleashed a short attack on the Indian company. 

Adani Enterprises said the company’s board decided not to go ahead with its FPO due to the “unprecedented situation and the current market volatility.” 

The company said their book-running managers would refund investor proceeds held in escrow — one of those investors was Abu Dhabi’s royal family. 

The board “felt that going ahead with the issue will not be morally correct.” 

“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of service our debt,” the company stated. 

Earlier today, Adani Enterprises shares crashed by 28% as a crisis in confidence plagues Gautam Adani’s corporate empire. 

Pershing Square’s Bill Ackman has been highly critical of Adani Enterprises since Hindenburg released their report one week ago. This morning, the billionaire tweeted:

“I would not find it surprising if the @AdaniOnline offering was rigged with affiliated buyers in addition to some real institutional participants like ADIHC. This would explain the low retail participation and today’s price decline.”

I would not find it surprising if the @AdaniOnline offering was rigged with affiliated buyers in addition to some real institutional participants like ADIHC. This would explain the low retail participation and today’s price decline.

— Bill Ackman (@BillAckman) February 1, 2023

We noted earlier that Credit Suisse designated a zero lending value for bonds sold by Adani Ports and Special Economic Zone, Adani Green Energy, and Adani Electricity Mumbai. 

Things appear to be materially worsening for Adani. He also lost Asia’s richest person status. 

*   *   * 

Turmoil remerged in the Adani group Wednesday after a top Swiss bank stopped accepting bonds from companies tied to Gautam Adani’s corporate empire for margin loans. 

Bloomberg reported Credit Suisse Group AG halted the acceptable of bonds of Adani’s companies as collateral for margin for banking clients. This news led to further declines in Adani shares and dollar bonds. 

The Swiss lender’s private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd., according to people familiar with the matter, who asked not to be identified discussing private information. It had previously offered a lending value of about 75% for the Adani Ports notes, one of the people said.

When a private bank cuts lending value to zero, clients typically have to top up with cash or another form of collateral and if they fail to do so, their securities can be liquidated. –Bloomberg 

Shares of Adani Enterprises crashed, closing down by more than 28%. Market cap losses across all Adani companies hit $93 billion since US short-seller Hindenburg Research accused it of corporate fraud one week ago. 

Hindenburg’s allegations sparked a crisis of confidence for Adani despite Adani Enterprises completing a $2.5 billion follow-on stock sale Tuesday, which briefly calmed investors. 

“Caution on Adani group stocks has increased after the news on action taken by Credit Suisse. 

“This can put a financing hurdle for the group’s further growth,” said Sameer Kalra, founder of Target Investing in Mumbai. 

Dollar bonds of Adani Group also plunged. 

Peter Garnry, head of equity strategy at Saxo Bank A/S, said the problem now is “the dynamics are becoming a self-reinforcing negative feedback loop and investors are now just dumping the shares and asking questions later.”

Garnry added: “This is potentially a bigger problem for Indian equities which have done so well during the pandemic as China pursued its zero Covid policy. The long-term ramifications could be quite negative.”

The worsening rout in Adani weighed on India’s broader equity benchmarks. 

The contagion has been quick, and so has the wipeout of Adani’s personal wealth, plummeting by $44 billion to about $72 billion in one week, according to the latest Bloomberg data. 

Adani is no longer the richest person in Asia. 

Via SchiffGold.com,

Gold demand grew by 18% to 4,741 tons in 2022, the highest demand in 11 years, according to data compiled by the World Gold Council.

Massive central bank purchases coupled with strong retail investor buying and slowing outflows from ETFs drove overall demand higher.

Gold demand last year was on par with 2011, “a time of exceptional investment demand,” according to the WGC.

Central banks bought 1,136 tons of gold last year. It was the second-highest level of net purchases on record dating back to 1950. It was the 13th straight year of net central bank gold purchases.

Central banks added 417 tons of gold to their reserves in Q4, bringing the total in H2 to 862 tons. This was due to a combination of reported buying by central banks in Turkey, India, Uzbekistan, and many other emerging markets, along with an estimate for significant unreported buying. Central banks that often fail to report purchases include China and Russia. Many analysts believe China is the mystery buyer stockpiling gold to minimize exposure to the dollar.

Meanwhile, the Chinese central bank officially waded back into the gold market after going silent in 2019. The People’s Bank of China reported 62-ton purchases in both November and December, raising its total gold reserves to over 2,000 tons for the first time.

According to the World Gold Council, there are two main drivers behind central bank gold buying — its performance during times of crisis and its role as a long-term store of value.

It’s hardly surprising then that in a year scarred by geopolitical uncertainty and rampant inflation, central banks opted to continue adding gold to their coffers and at an accelerated pace.”

Investment demand for gold was also strong in 2022, totaling 1,107 tons, a 10% increase year-on-year.

Gold bar and gold coin demand grew by 2%, building on strong demand in 2021. In total, global investors bought 1, 217 tons of gold bars and coins.

The second half of the year was particularly strong for bar and coin buying, charting two successive quarters of demand of around 340 tons for the first time since 2013.

According to the WGC, “The need for wealth protection in the global inflationary environment remained a primary motive for gold investment purchases.”

Investors in the West had a particularly strong appetite for gold and broke an annual record. Combined US and European purchases of gold bars and coins hit 427 tons. That exceeded the previous record of 416 tons set in 2011.

Institutional investors who primarily buy and sell paper were not as bullish on gold last year. Despite rampant price inflation, they bought into the narrative that the Federal Reserve was going to win the inflation fight. They sold gold every time the Fed hiked rates. As a result, gold ETFs charted outflows of 110 tons. That was an improvement over the 189-ton outflow in 2021.

The World Gold Council summed up the dueling narratives in the investment market.

As well as underlying support from geopolitics, gold investment was impacted by a combination of multidecade high inflation, especially in Western markets, and the resultant aggressive rate hikes by the Fed and other central banks. Bar and coin investors focused on the former and sought the safety of gold as a hedge against inflation. In contrast, gold ETF investors reduced their holdings, especially in the second half, focusing on gold’s rising opportunity cost as central banks across the globe imposed hefty rate hikes and the US dollar surged.”

Gold jewelry demand softened in 2022, falling 3% to 2,086 tons. Rising gold prices in the fourth quarter drug down demand.

Demand for gold in technology saw a sharp Q4 drop, driving a full-year decline of 7%. According to the WGC, “deteriorating global economic conditions hampered demand for consumer electronics.”

Gold used in the electronics sector fell 18% y-o-y to 58 tons during the final quarter of the year. According to the World Gold Council, it was the largest quarterly y-o-y fall in the sector since 2009 – a direct consequence of the unprecedented combination of challenges the industry is currently facing.

The gold supply was up modestly, rising 2% on the year, with mine production inching up 1% to a four-year high of 3,612 tons. Even with the rebound in mine output, it still hasn’t recovered to the 2018 record.

Now that the COVID-19 production disruptions and widespread China safety stoppages of 2021 have reversed, this lack of production growth gives further credence to claims that gold production is close to plateauing.”

Here’s how the World Gold Council summed up gold’s performance in 2022.

Gold’s diverse uses, in jewelry, technology and by central banks and investors, mean different sectors of the gold market rise to prominence at different points in the global economic cycle. This diversity of demand and self-balancing nature of the gold market underpin gold’s robust qualities as an investment asset.”

You can read the full World Gold Council 2022 Demand Trends Report HERE.