Inflows in exchange traded funds accelerated the four percent yearly increase in gold investments, according to data from the World Gold Council.
Apprehensions over a possible Greek exit from the euro zone did not stir up a powerful buying trend but continued to simmer underneath the surface. This was responsible for supporting investment demands in Europe.
Many of these (ETF) inflows focused on commodities listed in the US ETFs although those in Germany and the United Kingdom benefited as well. Market analysts said one-third of investors with ETFs in the US have retained their positions for over five years.
Growth of demand for said funds offset a reduction in gold coin and bar investments. US ETFs benefited more from the investors’ state of mind. Funds poured into ETFs in moderate volumes (+25.7 tons) following two years of net-selling. Outright bearish position adopted by numerous traders in 2013 and 2014 caused demand in the industry to stay within 250 tons.
Perhaps, this indicates demand has reached sustainable levels compared to averages of 300, 000 and 400, 000 during the financial meltdown. Bar and coin demand in the euro region gained 16 percent every year.
Observers believe among the primary factors supporting said demand was the coming out of a potent market in the European Union for gold ingots and coins. This market barely existed before the world economic crisis. Regional demand was firm in the first quarter and only eight percent under the five-year median on a quarterly basis. Meanwhile, demand in Germany increased by the biggest volume at 5.4 tons as said market was benefited by lenient policies on cash payments compared to Belgium and France.
On the other hand, demand was reduced during the second quarter partly because of investor weariness resulting from regional economic and geo-political concerns. Demand in Turkey was the lowest and this was the lowest since the third quarter of 2009 because of domestic prices encouraging selling In terms of volume.
Thailand underperformed among smaller markets in Southeast Asia. Demand dropped 20 percent to 19.5 tons due to continuing political turbulence and FOREX trends. The Thailand baht has been comparatively strong when many currencies in Asia were depreciating versus the US dollar. This led to the decline in the yellow metal and discouraged investments in gold.
In addition, investments decreased in India to a six-year trough after local traders chose high-performing assets instead. Upbeat returns produced by local equity markets showed an appealing option for the precious metal especially with the absence of clear catalysts to give prices a clear direction.
Meanwhile, purchasing remained unyielding as net purchases broadened to 17 uninterrupted quarters. Firmness of countries’ central banks was among the crucial theme during the first quarter of this year. These financial institutions continued their buying momentum and net purchases amounted to 119.4 tons for Q1 almost unchanged against the same instance in 2014. The major driver of accumulation of gold reserves emerged as the diversification. A lot of central banks were exposed to limited primary reserve currencies and turned to gold as protection against unpredictable currency movements