Investors Taking A Shine To Gold

Investors are flooding to protect their wealth by pouring money into gold, according to the latest research.

Trade body the World Gold Council reports the industry enjoyed a buoyant first quarter and the second best ever as demand was up a fifth year on year.

The council argues that turmoil in stock markets and uncertainty over the world economy is making investors move to gold as a safe haven.

“Negative interest rates in Japan and Europe, China devaluing the yuan and a slowdown of interest rate rises in the USA undermined confidence in other assets as turbulence rocked stock markets around the world,” said a spokesman.

“Negative interest rates significantly hit sovereign bonds as low risk assets and triggered huge interest in gold-backed ETFs.”

Massive demand for ETFs

Gold ETFs saw a huge demand – up from a massive fall in demand during the last three quarters of 2015.

The figures for 2015 showed a fall in demand of 128 tonnes, while the first quarter of 2016 witnessed a surge of 363.7 tonnes.

“ETF inflows reached a seven year high and the sector had a stand out quarter,” said the spokesman.

“The appeal of ETFs is also a phenomenon seen mostly in the West. China and the East do have small holdings but nowhere near the amount of money channelled into ETFS by the West.

“Gold is re-emerging as a diversified asset because of factors such as liquidity and low volatility.”

Less than spectacular performance

Meanwhile, other gold markets for Q1 2016 showed less than spectacular returns.

Total demand was 1,290 tonnes – up 21% year on year

  • Global demand for jewellery dropped 19% mainly due to higher prices and industrial action in India
  • Investment in coins and gold bars stood still, with a rise of just 1%
  • Central banks bought 109 tonnes

Spot prices for gold peaked at US$1,182.6 for an ounce, compared with $1,218.5 a year ago.

Supply from mining companies was up 4% compared with 12 months earlier to 1,135 tonnes.

“In the long term, gold production has levelled out as mining companies restructure to reduce costs and maximise output,” said the spokesman.

“The impact of new mines coming online is reducing, although recently opened operations in Mexico, Canada and Guyana are ramping up production.”