Global demand for gold surged 21% in the first quarter of 2016, the strongest first quarter on record, the World Gold Council (WGC) said.
During the January-March period, demand for gold weighed stood at 1,290 tonnes compared 1,070 tonnes in the first quarter of 2014, according to the council’s latest Gold Demand Trends report.
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The increase in demand was driven by huge inflows into exchange traded funds (ETFs), fuelled by investor concerns regarding economic fragility and an uncertain financial landscape, the London-based group said.
"Concurrently, global demand for jewellery 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," the WGC noted.
Inflows into ETFs totalled 364 tonnes in the quarter – the highest quarterly level since first quarter of 2009 – compared to 26 tonnes in the first quarter of 2015.
The report says that gold found favour 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 US and global stock market turmoil.
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By GlobalDataTotal bar and coin demand was 254 tonnes, marginally higher than the same period last year.
In total, investment demand stood at 618 tonnes, up 122% from 278 tonnes in the same period last year. During the quarter, gold price appreciated by 17% in dollar terms.
India’s demand for gold plummeted 39% to 116.5 tonnes due to rising metal prices. In China, demand dipped 12% to 241.3 tonnes due to continued economic slowdown as well as higher prices.
World Gold Council head of market intelligence Alistair Hewitt said: "Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand, helping to push prices up 17% over the course of the quarter, as ETF inflows swelled.
"Conversely, jewellery demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42 day strike by jewellers in India. But we believe Indian demand has simply been postponed, with buying likely to increase for Akshaya Tritiya and the wedding season.
"Looking ahead we anticipate that ongoing market uncertainty and unconventional monetary policies will continue to support both investment and central bank demand. This, combined with an expected recovery in India, should see gold demand remain healthy over the course of 2016."
Total supply for the first quarter of 2016 saw an increase of 5% to 1,135 tonnes compared with 1,081 tonnes in the first quarter of 2015.
