Gold investment hits record

INVESTMENT has overtaken jewellery as the largest source of gold demand, according to the World Gold Council.
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A 15% jump in gold demand in the June quarter took total demand for the first six months of 2016 to 2335 tonnes, the second-highest first half on record.

Huge exchange-traded funds inflows of 579t offset weaker jewellery demand.

ETF demand in the first half almost matched the record full-year demand from 2009.

First half investment demand hit a record 1063.9t, up 16% on the previous record from 2009 – during the depths of the global financial crisis.

According to the WGC, investment was the largest component of gold demand for two consecutive quarters for the first time ever.

The council said a “perfect storm” of conditions in the gold market had led to the increase in demand.

"The global picture for gold is dominated by considerable and continued investment demand driven by the West as investors rebalance their investments in response to the ever-expanding pool of negative yielding government bonds and heightened political and economic uncertainty," WGC head of market intelligence Alistair Hewitt said.

"The foundations for this demand are strong and diverse, drawing on a broad spectrum of investors accessing gold via a range of products, with gold-backed ETFs and bars and coins performing particularly strongly.

"But the global gold market is, and has always been, based on balance: so whilst investment is currently the largest component of demand, we see a gradual return for the jewellery market in the second half of 2016."

Supply was up 10% year-on-year in the June quarter to 1144.6t, but supply for the half only increased by 1%.

The gold price posted the strongest first half performance in over 35 years, rising by 25%.

Spot gold averaged $US1221.72 an ounce during the six months to June 30.