The World Gold Council on Thursday released its first quarter Gold Investment Digest, with top-line findings showing that despite an initial pullback of the gold price in January, positive investor sentiment towards gold and greater confidence in the timing of jewellery purchases contributed to a strong quarterly performance, prompting gold to reach new all-time highs in early April â€“ and ultimately leading it to breach the $1,500/oz mark.
The gold price rose 2.4 per cent during Q1 to $1,439.00/oz by March 31 2011, on the London PM fix, a more modest rise relative to average gains of 6.2 per cent per quarter over the past two years.
At the end of Q1, ETFs held a total of 2,110.3 tonnes of gold worth $97.6 billion, compared with the high of 2,167.4 tonnes as of December 31 2010, or $97 billion â€“ a modest net outflow in the quarter.
Central banks continued to be net buyers of gold in Q1 with emerging market countries, including Russia and Bolivia, being among key net buyers. As a group, the official sector holds 18% of all above ground stocks of gold.
Against a backdrop of uncertain global markets, and a rising price, gold remained one of the least volatile commodities in the wider commodities mix, with average annualised volatility of only 13%, down from its historical 20 year average of 15.8%.
â€œGoldâ€™s performance in Q1 2011 was characterised by continued concerns over the global economy, which have led investors to become increasingly aware of goldâ€™s qualities as a preserver of wealth, said Juan Carlos Artigas, investment research manager at the World Gold Council.
â€œOur intelligence indicates that purchasing confidence in key jewellery markets, notably India and China, increased during the period, as price volatility declined and the dollar weakened against local currencies, resulting in a more measured price increase,â€ he said.
A key trend noted in the Gold Investment Digest is the growing concern over global inflation, with comments by the Federal Reserve signalling an extended period of low rates serving to increase inflation expectations in the US.
While inflation in countries such as India and China appears to have subsided to a degree, it still remains high. Moreover the threat of food price inflation is a growing concern for consumers around the world. In this environment, gold provides an alternative to hedge this exposure in a way that is not easily replicated by other assets.