December 2021 in Precious Metals, by Steven Cochran

Welcome to SurvivalBlog’s Precious Metals Month in Review, where we take a look at “the month that was” in precious metals. Each month, we cover gold’s performance and the factors that affected gold prices.

What Did Gold Do in December?

Gold prices continued having difficulty in moving higher when they should have in December, but ended the month and the year back above $1,800. $1,780 proved to be the big support level this month. It was a seesaw month for gold, as prices would negate big losses a day or two later.

Part of this was “good news is bad news” and vice versa for gold. The Non-Farm Payrolls Report was a disaster, showing only 210,000 new jobs added in November, less than half the expected 543,000 new jobs. While the dollar was unfazed, investors stampeded into bonds and gold. The yield on the 10-year Treasury note fell from 1.43% to settle at 1.36%. Gold gained more than $20, almost exactly wiping out the previous day’s losses.

December 14th saw the highest monthly jump on record – up 9.6% – for producer prices, igniting fears of the Fed slashing QE to prepare for early rate hikes. Gold lost more than $15 on the news. Two days later, the worst PMI in years sent gold blasting $30 higher, just pennies away from $1,800

On December 17th, gold broke the $1,800 barrier at the close for the first time since Nov 22nd. It then fell below $1,800 for two sessions before climbing back again.

Rounding out the month, gold hit the high for the month on December 28, gaining $30 over the previous week’s lows. This attracted the year-end profit takers, who sent gold to $1,790 before buyers brought prices back up over $1,800.

Factors Affecting Gold This Month


“Pocketbook” inflation continues to rise, and Americans can’t keep up. Wages showed a year-to-year gain at 4.8% for November. However, at 6.8%, inflation outpaced those gains. Workers’ purchasing power actually fell 2%.

The mainstream financial press keeps making the mistake of taking rising nominal interest rates to mean that the opportunity costs of holding gold have gone up. But real rates are still solidly negative.

Personal Consumption Expenditures (PCE) grew by 5.7% in November, the fastest gain since the 1980s. Core PCE, the Fed’s favorite inflation gauge, rose by 4.7% This has some experts cautioning that the Fed might feel pressured to raise interest rates in March at the same time it ends QE. This would be an unusually hawkish departure from normal policy by the Fed, but the December FOMC meeting shows that they are laying the groundwork to do exactly that.
In the UK, inflation is running a 5.1%, the highest in 10 years. The unprecedented energy shortage, higher taxes, and higher inflation have robbed British families of £1,200 in purchasing power this year.


Countries in Western Europe are going back under lockdown as Omicron runs rampant, wrecking their economic recoveries. Natural gas prices hit new highs of more than €100 per MMBtu this month, setting off fears that Putin will let Europe freeze to death if they defy his demands that NATO pull out of Poland and the Baltic states.



The Chinese government’s sudden order to banks to choke off credit to the real estate sector has led to cascading failures of property development companies and a full-blown economic crisis. The Chinese central bank reduced the level of reserve requirements for banks in December for the second time this year, and actually cut interest rates for the first time in almost four years. These actions may not be enough to counter the ongoing economic slowdown.

Shortages and higher costs for both energy and food are pushing Chinese inflation higher at the same time that the economy and consumer demand is slowing down. Rising inflation plus an economic slowdown plus lower interest rates is the recipe for stagflation. China’s interest rate cuts are causing increasingly negative real rates and lowering the opportunity costs of owning gold. Concerns over yuan devaluation will contribute to domestic gold demand


The stock market spent the first half of December freaking out about the Omicron COVID virus one day, then thinking it was no big deal the next. This had a large effect on stocks and oil prices, but the waxing and waning of overall risk sentiment also influenced gold prices. As long as the virus continues to drive market sentiment, gold investors will need to keep track of developments on that front as well.

Much like their economy, China’s COVID vaccine is falling short when compared to vaccines in the West. The Sinovac vaccine does a worse job protecting people against Omicron than other vaccines, just as it did poorly against Delta. This is another thing jumping into the dogpile of bad news in China, and another reason for increased Chinese gold demand.


Two big things that didn’t affect the US gold market at all were the military provocations in Taiwan and Ukraine. While certainly factors in gold demand in East Asia and Eastern Europe, respectively, the American gold market ignored it all.

The Fed

Powell quashed fears in December that the Fed was ignoring reality with his sudden announcement that the central bank would immediately pivot from focusing on unemployment to fighting inflation.

Part of that was announcing a doubling of the rate of QE tapering beginning in January. The Fed began tapering at $15 billion dollars per month in November. By tapering at $30 billion per month starting in January, the Fed’s bond buying spree will end in March.

Powell assured markets after the December FOMC meeting that the Fed would not raise rates while it was still actively buying bonds. Since there is no April FOMC meeting, the Fed would either wait until May to raise rates or taper faster in January and February to allow the first rate hike in March. Right now, there is a 70% probability of a March rate hike.

The Fed’s “dot plot” drastically increased the number of possible rate hikes next year. Where Fed officials had earlier been floating the idea of maybe one rate hike near the end of 2022, the December FOMC dot plot revealed a possible three rate hikes in 2022. This brings the Fed more into alignment with market expectations. The dot plot indicates two more rate hikes in 2023 and another two in 2024. At 25 basis points each, that would have us at only 2% three years from now. Maybe the Fed still isn’t being hawkish enough?

Central Banks

Several central banks are ahead of the Fed. The Bank of Poland raised rates 50 basis points to 1.75%. The Bank of Mexico also raised rates by 50bp to 5.5%. This is the fifth meeting in a row that they have hiked interest rates, fighting an inflation rate that is still at 7.4%. Their inflation target is 3%.
The Bank of England confused the heck out of everyone by not hiking rates last month, after talking about it for weeks. They finally came through with a rate hike, but it was a tiny one. They raised rates 15bp to 0.25%.
The European Central Bank has a civil war raging behind closed doors. Many ECB policymakers were shouted down during a big argument with leadership at this month’s meeting. They wanted the central bank to at least acknowledge that inflation may be higher than ECB economists’ projections.
EU composite inflation is running at 4.9%, with the ECB inflation target being 2%. The official line is that inflation will go down by itself. ECB inflation forecasts are so unreliable that they have become the butt of jokes, but senior staff refuses to admit it.
The Peoples Bank of China had to cut rates and loosen capital requirements for banks this month to rescue the economy from the slowdown triggered by the implosion of the real estate sector. There have been a record number of credit downgrades of Chinese property developers. Even with the stimulus, it looks like China will have slower economic growth than the US in the fourth quarter. Estimates of fourth-quarter GDP range from 4.5% to 4.9%. The last estimate for US fourth-quarter GDP from the Atlanta Fed GDP was 7.6%.

Central Bank Gold Purchases

This month’s central bank gold report covers October.

Central banks only added 2 tons of gold in total in October, as purchases were almost completely negated by selling. The big buyers were Kazakhstan with 5.6 tons, and India, with 3.8t. Russia added 3.1t from domestic suppliers, and Ireland returned to the gold market again, purchasing another ton. The ECB bought one ton of gold as well. That’s something we don’t see very often.

The big seller was Uzbekistan, dropping 8.4t onto the market. Turkey sold 1.7t, doubtlessly part of the effort to keep the Turkish lira out of Weimar-land, and Qatar sold 1.6t.

Gold ETFs

Gold-backed ETFs saw 13.6t of net inflows in November, finally reversing months of outflows. In a change from recent months, it was North America and Europe seeing gold ETF demand and Asia selling.

North American gold-backed ETFs saw 12.1t of inflows, all of it from the US. European ETFs had net inflows of 5.6t, as inflows in the UK and France were countered by selling in Germany and Switzerland. Asian gold ETFs lost 5 tons, with outflows from China overwhelming inflows elsewhere.

On The Retail Front

American Silver Eagle sales remained unchanged at 1.523 million, with no sales at all recorded in December. ASE sales basically dried up the second half of November due to another shortage of silver coin blanks.

28,275,000 Silver Eagles were sold this year. This is below last year’s 30 million coins, but 2020 had panic buying from the appearance of COVID, and had 12 full months of sales. We only had ten months of ASE sales in 2021, and the US Mint spent most of the year limiting purchases.

42,000 troy ounces of American Gold Eagles of all sizes were sold in December, bringing the 2021 total to 1,252,500 ozt. American Gold Buffalo coin sales were 10,500 ozt in December, for a 2021 total of 350,500 ozt.

The grand total of US Mint gold bullion coin sales for 2021 was 1,603,000 This is the second-highest annual mintage, and by far the best year for US gold coins since the 1.8 million ounces sold in 2009.
Americans bought more than 91 tons of gold over the first nine months of 2021, up a huge 79% from last year. Chinese private gold purchases were up 54% compared to the first nine months of 2020, and Indian gold purchases were up 24%.
Gold bar imports in India were $1.5 billion in the first nine fiscal months (April-November) this is 167% higher compared to last year (which was during the worst of the COVID epidemic there.)
The SCMP reports that gold jewelry sales in Hong Kong are up 30% this year, as large weddings are allowed once again. Jewelry sales plunged 80% last year due to China’s COVID restrictions, which are the world’s most severe.

Market Buzz

The government of Kyrgyzstan seized the giant Kumtor gold mine from Canada’s Centerra Gold without compensation in May, and is now suing the company for not handing over the computer passwords. Centerra has seen no reason so far to give them the passwords needed to run the mine that was stolen from them.
The United Arab Emirates (UAE) are finally moving to curb long-standing charges of money laundering. The largest portion of this is “blood gold” coming into the UAE from Africa under forged customs documents. The London Bullion Market Association, which oversees the Good Delivery international gold standard, was about to block the UAE from participating in the global gold market over these charges.

In related news, the Commodity Futures Trading Commission fined two Dubai gold traders and their brokerages $100,000 for gold manipulation.
Demand for silver-backed ETFs is so strong, that JP Morgan had to buy another vault just to store all the extra bullion.
Blackrock economists expect that inflation will continue to outpace the Fed. Gold prices will be supported next year by negative real interest rates, dollar underperformance, and safe-haven demand.
The growing adoption of electric cars and trucks is pointing to a long-term bear market for palladium. Palladium is used in automotive catalytic converters, but if most of the new cars are electric, there’s no need for them. Analysts are predicting one last sharp rally for palladium as automotive chip shortages ease in early 2022, letting automakers increase production again. It’s a long, slow slope downwards afterward though.
Higher gold prices have more gold miners buying abandoned gold mines and processing the tailings. Modern gold refining methods are able to extract far more gold than the old ways. Since the ore is already dug up, processing gold tailings is much cheaper than mining it themselves.

Looking Ahead To Next Month

What lies ahead in 2022? January is historically a good month for both gold and silver in the US. January is always the best month for American Silver Eagle sales. As Erdogan continues to wreck the Turkish economy, inflation is estimated at 30% for December. People lucky enough to have not been wiped out yet are buying as many US dollars and gold as possible.

February in India is considered to be an auspicious time to get married. That means gold wedding presents will be purchased in January.

We have a great treasure story for Christmastime: Excavation of a sunken ancient ship off the port of Caesarea has revealed a gold ring with a gemstone setting showing Christ as the Good Shepherd. The ring is thought to date from the Third Century AD and is one of the earliest known depictions of Jesus as the Good Shepherd.

This column is intended for educational purposes only. It is not intended as investment advice. Past performance does not guarantee future results.

– Steven Cochran of Gainesville Coins