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Gold's rise driven by investment demand says WGC

Global investment demand was 448t in the second quarter of 2016, up 141% from 186t in the same period last year.

picture of gold bullion
Investors have piled in over the past six months

Confirmation of the strength of investment demand for gold came for the latest World Gold Council trends published today.

According to the industry trade body, global investment demand was 448t in the second quarter of 2016, up 141% from 186t in the same period last year.

For the half year, investment demand hit a new record of 1,064t, or 16% above even the aftermath of the global credit crunch.

Institutions looking for alternatives to bonds as interest rates have gone negative across more and more countries accounted for the bulk of the buying, but small investors have also been active with sales of US eagle coins, for instance, climbing by 84%.

Demand for gold-backed ETFs though reached almost 580t, again exceeding even the comparable period in 2009.

A 25% rise in the price of gold is the best half year performance since 1980 and has reflected this investment demand.

In some local currencies the performance was  even better with a 37% rise in sterling terms and 27% in Indian rupees.

The flip of this price appreciation has been to dull consumer demand in even gold-mad places such as India and China.

Jewellery demand in India over the half  was the lowest since 2009 at 186.3t.

High prices and low economic growth also weighed on Chinese consumer sentiment Gold jewellery demand in China was similarly weak dropping 15% to 143.5t in the last quarter.

The WGC sees jewellery demand recovering through the second half as India’s key festivals of Dhanteras and Diwali together with the holiday season in the west  inject support.

Add on a brighter note, demand in the UK grew marginally to reach 8.2t in the first half, the best since 2010.

A couple of hours into US trading, spot gold was US$6 higher at US$1,352, silver was trading at US$20.21 and platinum dropped US$11 to US$1,161.

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