Metals Notes

Gold Demand at Record High Level in Q1 2016

Amid a world of negative interest rates and slow growth, investors have stepped up the demand for gold in record breaking fashion. Considering the uncertain global economic environment, investors can’t seem to get enough of gold right now, and there’s little sign that demand is letting up.

That is the assessment from the recently released World Gold Council’s Gold Trends quarterly report. The report showed gold demand rose 21% to 1290 tonnes in the first quarter of this year compared to Q1 2015, marking the second largest quarter on record. This, despite a decrease in central bank buying and a lesser demand for gold jewelry as well.

Factors Driving Gold Demand

world gold council gold demand

The World Gold Council’s recent report showed that gold demand reached record high levels in Q1 2016.

Driving that appetite for the precious metal were significant inflows into exchange traded funds (ETF’s) according to the World Gold Council, which is the gold industries association of the world’s largest gold producers. Those inflows totaled 364 tonnes for the quarter, which was the highest quarterly level since Q1 2009. In the same period a year ago, those ETF inflows were a mere 26 tonnes. The SPDR Gold Trust ETF, one of the most popular gold tracking ETF’s, is up 20% this year.

Even though inflation, considered a cornerstone to gold’s popularity, remained in check throughout much of the developed world, global uncertainty fueled investor demand for gold. The price of gold rose 15% in the first quarter of this year. It was the strongest quarterly price performance in nearly three decades.

It wasn’t just signs of a stressed economy that drove investors into gold. Negative interest rates in Asia and Europe contributed as well, the World Gold Council noted.

Council officials attributed the rise to three principal factors: negative interest rates instituted by central banks in Japan and Europe (and talk that the Fed also discussed negative interest rates); Chinese currency devaluation; and the likelihood that the trajectory of interest rate hikes in the U.S. will be slower than initially expected.