By CAMILLA CANOCCHI FOR THISISMONEY.CO.UK
- Demand up 21% in first three months of 2016 – the highest for a first quarter
- Gold price up 17% in the quarter
- Today gold was $1,270, after backtracking from overnight highs of $1,279
Demand for gold rose to its highest-ever level for a first quarter this year as investors responded to uncertain economic times by stocking up on the safe-haven commodity.
The rising demand for gold has triggered a 17 per cent jump in the metal’s price in the first three months of the year, with some commentators suggesting it could rise further if Britain votes to leave the European Union next month.
Figures published today by the industry-backed World Gold Council showed that demand for gold rose by 21 per cent in the first quarter of 2016, which marked the second-highest demand on record.
Most demand came from investors buying ‘paper gold’ – exchange traded funds backed by the metal – although buyers of ‘physical’ gold, such as coins and bars, still enjoyed price rises.
The stock market sell-off seen in February, which was triggered by concerns about China’s slowing economy, falling oil prices, the weakening of the US dollar and negative interest rates in Europe and Japan have all contributed to driving demand for gold higher.
Today, gold was priced at $1,270 an ounce, backtracking from overnight highs of $1,279 as the dollar rebounded slightly and stocks rallied.
Fawad Razaqzada, market analyst at City Index, said that gold could benefit if the equity markets started to pull back once again or if the dollar weakens once more.
‘It is also not unheard of for both gold and equities to rise in tandem. So just because it is not rising now, it doesn’t mean the outlook for gold has turned bearish – not yet, anyway.’
Because gold is priced in US dollars, a weaker dollar makes it an attractive investment to non-US buyers. Gold is also often considered an inflation hedge and a ‘safe haven’ investment when stock markets are volatile.
The World Gold Council said: ‘Shifts in the global economic and financial landscape have created a positive environment for gold investment in recent months.’
It also said that demand was going to be supported in the coming months amid ongoing market uncertainty and negative interest rates.
Fund managers at ETFS Physical Gold said: ‘Gold is an important hedge during uncertain conditions, since it tends to have a low correlation to the broader economic environment.
‘With heightened concerns around European bank liquidity, the risk of Brexit and uncertainty regarding US presidency candidates it’s no surprise that investors are returning to gold as a diversifier and safe haven investment.’
Separate research from Pure Gold Company has found that a third of the increase in demand is coming from financial services professionals – bankers deserting banks to buy gold.
An extra 11 per cent is coming from expats worried about Brexit, while another 10 per cent from Europeans worried about Brexit.