Western investors have been flooding into gold-backed ETFs in the early months of 2015, driving up global demand for the precious metal.
Gold demand was stable through the early months of 2015, according to a report from the World Gold Council.
The latest Gold Demands Trends report showed total demand for the first quarter of the year was 1,079 tonnes - 1 per cent down on last year.
Conditions differed from market to market, with greatest demand in China and India being broadly balanced out by poorer demand elsewhere.
One of the key drivers of demand the market for gold-backed exchange traded funds, which increased its investment in physical gold by 26 tonnes over the first quarter.
This meant flows turned positive for the first time since the fourth quarter of 2012, indicating a return to gold by Western investors.
Alistair Hewitt, head of market intelligence at the World Gold Council, said: “The global gold market’s ecosystem functioned healthily during the first three months of 2015, illustrating the unique nature of gold and its ability to rebalance across sectors and geographies.
“This broadly stable global picture belies regional and sector differences which include a 10 per cent drop in jewellery demand in China, a 22 per cent uptick in jewellery demand in India and the first net inflows to gold ETFs since 2012, reflecting gold’s resilience and ability to respond to different cues in different ways.
“Once again, consumers in Eastern countries dominated the market, with China and India alone accounting for 54 per cent of total global consumer demand in the quarter.”
Buoyant stock markets in India and China put investment in bars and coins under pressure, the report said, which meant ETF inflows were the key for the 4 per cent year-on-year rise in investment.
Martin Arnold, director for research at ETF Securities, said: “The outlook for cyclical commodities has improved following China’s central bank cutting interest rates once again in order to stem the slowdown in economic activity.
“Gold appears to have come back into favour as a defensive hedge against declining sentiment, with physical gold ETPs receiving the largest inflows in 12 weeks, totalling over $38m.
“The precious metal appears set to benefit again this week, with Greek debt negotiations likely to prevent any significant upswing in investor risk appetite.”
The largest physically-backed gold ETF is New York’s SPDR Gold Shares, which holds 728 tonnes of the metal.
Adviser view
Nicholas Round, managing director of Shropshire-based Treowe Wealth Management, said: “We have not been keen to recommend gold, and do not include it on our portfolios.
“The fact that gold is a secure investment in case of a crisis is a view generated by an emotional fear. Unless you walk around with ingots in your pockets that you feel can be traded, how do most of the investments have any value?”
