According to the newest World Gold Council report, global gold demand surged in the first quarter of 2016, making it the second largest quarter on record. How come?
The rush for gold in the first quarter coincided with a turbulent start to the year especially in China, amid concerns about global economic fragility.
Diversification
Huge inflows into Exchange Traded Funds (ETFs), fuelled by nervous investors took the demand up to a 21 percent increase compared to the same period last year.
Gold also 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.
China Keeps Buying
The People’s Bank of China also remained one of the biggest gold buyers in the first quarter of the year as it continued to diversify its reserve holdings despite higher prices.
«Looking ahead to the rest of 2016, we are encouraged by developments within the Chinese market. The launch last month of a yuan-denominated gold benchmark will significantly increase the liquidity and efficiency of the gold price discovery mechanism,» Roland Wang, Managing Director of the World Gold Council China, commented:
