Global gold demand surged in the first quarter as investors seeking refuge from financial unrest swooped on the commodity, seen as a safe investment, the World Gold Council (WGC) said on Thursday.
Total gold demand stood at 1,290 tons from January to March, a 21 percent increase compared with the first quarter of 2015. The first quarter of 2016 was the second largest ever in terms of the recorded volume of gold, the London-based group said. According to the WGC, the largest quarter was in the final three months of 2012, when demand stood at 1,290.6 tons. The latest increase meanwhile "was ... fueled by investor concerns regarding economic fragility and an uncertain financial landscape," the WGC said. "Concurrently, global demand for jewelry was down 19 percent, as higher prices and industrial action in India and a softening of the economy in China meant many consumers delayed making purchases." Investment demand stood at 618 tons in the first quarter, more than double the 278 tons seen during the equivalent period one year earlier. The period saw "huge inflows" into so-called exchange traded funds (ETFs), it added. In turn, gold rallied 17 percent in dollar terms during the period. Gold has continued to win support in the second quarter, reaching a 15-month high of $1,303.82 an ounce at the start of May. Gold traded at $1,276.85 an ounce on Wednesday.
"Gold found favor as a risk diversifier due to the negative interest rate environment in Europe and Japan, combined with uncertainty over the Chinese economy, anticipation of slower interest rate rises in the U.S. and global stock market turmoil," the WGC said. Alistair Hewitt, head of market intelligence at the industry body, said that "ongoing market uncertainty and unconventional monetary policies will continue to support both investment and central bank demand" for the precious metal. "This, combined with an expected recovery in India, should see gold demand remain healthy over the course of 2016," he added.