Should Gold Investors Worry About Global Demand?

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The price of gold rebounded strongly during the first three months of the year and showed signs of stabilization after a brutal performance that most gold bugs would rather forget. Many analysts believe the precious metal’s bull market has run its course, but overall gold demand appears to be holding steady as jewelry purchases offset a wait-and-see approach by investors.

In the first quarter of 2014, total gold demand was 1,074.5 tonnes, relatively unchanged from the impressive 1,077.2 tonnes seen a year earlier, according to a new report from the World Gold Council. Growth in the jewelry sector offset minor reductions in technology demand and central bank purchases. Interestingly, there were major changes within the investment category. Demand for exchange-traded funds and similar products was flat after posting an outflow of 176.5 tonnes in the first quarter of 2013, while total bar and coin demand plunged 39 percent to 282.5 tonnes during the same period.

“On the one hand, tensions in Ukraine brought gold’s risk-hedging properties into focus. This resulted in positive monthly inflows to ETFs in February, for the first time in over a year, which were repeated in March. However, expectations for continued US – and global – economic recovery and possible increases in U.S. interest rates over coming years had a contrasting effect, which neutralized these inflows,” explained the WGC report.