Inflows into ETFs of 363.7t were the highest since Q1 2009 as sentiment towards gold improved markedly. The pace of USA interest rate rises was now widely expected to slow, also undermining confidence in traditional asset classes, the report said.
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“This year, imports are likely to go up by 10-15% at the top end, similar to the demand”, he added. Weakness in price sensitive markets was offset by strength elsewhere with 5% growth in China (62t) and strong demand in the U.S. and the United Kingdom, which grew by 55% and 61% respectively.
Both jewellery and investment demands of gold declined in India during the quarter under review.
Exchange traded funds were the main drivers of investment in gold over the quarter. This represents the 21 consecutive quarter that central banks have been net purchasers of gold as they continue to diversify away from the United States dollar. In neighbouring China, the world’s biggest consumer of the gold, demand dropped 12 percent in the first quarter to 241.3 tonnes, the WGC said.
India’s gold demand plunged sharply in the March 2016 quarter, mainly due to the 19 day strike by the country’s jewelers after 1% excise duty was reintroduced.
Hewitt from the World Gold Council said looking ahead, “ongoing market uncertainty and unconventional monetary policies” will continue to drive demand by investors and central banks.
For the full calendar year 2016, World Gold Council expects demand for the yellow metal to be in the 850-950 tonnes range in India.
Demand for gold has spiked by a record 21 per cent in the first three months of the year. Hedging by producers (40t) supported an increase of 56t in mine supply, although countered by a marginal decline in recycling. Buying by central banks dipped, however, and demand for jewellery fell due to the price rises and strikes in India.
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The Council writes that while the demand for gold ETFs was significant, “demand on such a scale is unlikely to be sustained”. Our goal is to stimulate and sustain demand for gold, provide industry leadership and be the global authority on the gold market. As a result, we create structural shifts in demand for gold across key market sectors.
