Global demand for gold in 2016 reached 4,309 tonnes in 2016, the highest level since 2013, an increase of 2% compared with 4,216 tonnes a year ago, driven by economic and political uncertainties, according to a report by the World Gold Council (WGC).

The increase in demand was driven by gold-backed inflows into exchange traded funds of 532 tonnes. The inflows were fuelled by investors’ concerns over future monetary policy, geopolitical uncertainty and negative interest rates, the council's latest Gold Demand Trends report said.

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Total bar and coin demand was 1,029 tonnes, a fall of 2% year-on-year.

In total, investment demand surged by 70% to a four-year high of 1,561 tonnes from 919 tonnes in 2015, driven by economic and political uncertainty particularly Brexit, the US presidential election and currency weakness in China.

In India, demand for gold slumped 21% year-on-year, driven by the government’s surprise demonetisation policy.

In China, gold demand decreased 7%, due to a high gold price throughout much of the year, constrained supply levels in the fourth quarter due to a tightening of currency controls in the country.

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Total supply dropped by 4% to 1,036 tonnes in the fourth quarter of 2016 from 1,081 tonnes in the corresponding quarter of 2015.

World Gold Council market intelligence head Alistair Hewitt said: “2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold. Retail investors – having been subdued for most of the year – responded quickly to the price fall in Q4, a fact reflected by a surge in demand in the physical market. With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant.”