The enthusiasm with which investors renewed their appetite for gold ETFs in Q1 saw prices of the yellow metal (in US dollar terms) rally 17% in in the first quarter of calendar year 2016 (CY16), says the latest World Gold Council report. Gold closed the quarter at $1,237/oz, 17% above the end-2015 price of $1,060/oz. Gold demand, on the other hand, grew 21% to 1,289.8 tonnes - the strongest Q1 on record. Inflow into gold exchange traded funds (ETFs) at 363.7 tonnes in the first quarter of calendar year 2016 (CY16) also hit a seven-year high. Uncertainty created by negative interest rate policies implemented by central banks in Japan and Europe; China's devaluation of the yuan fuelled fears over the country's economic health and the potential impact on global growth; and a likely slowdown in the pace of US interest rate rises are the key reasons why investors, according to WGC, have seen an improvement in sentiment towards investment in gold. "Having seen regular - and at times substantial - outflows over the last three years, ETFs had a stand-out quarter as gold's investment qualities came back into sharp focus. Inflows reached a seven-year high, close to levels last seen during the Great Recession when the sovereign debt crisis was also in full swing. Gold found favour for its role as an effective risk diversifier, enhanced by its added benefits of liquidity and relatively low volatility," the report says. Inflows were global, the WGC report says, were not restricted to dominant Western markets. The volume of gold held in Chinese products more than doubled during the quarter. The trend continued into April, particularly in Europe where investors were plagued by lingering 'Brexit' fears. In response to such large-scale inflows, gold price in US dollar (USD) terms surged by 17%. This, according to the WGC, was the best performance in almost three decades and gold ranked as one of the best performing assets globally during the quarter. "The effect was also felt in the price of gold measured in other currencies, with double digit gains in the euro (+11%), British pound (+20%), Chinese renminbi (+16%), Indian rupee (+17%) and Turkish lira (+13%)," the report says.
