Record gold investments in the first half of 2016

News Arnulf Hinkel – 24.08.2016

With gold demand rising by 15 per cent during the second quarter, the first half of 2016 is now officially the second strongest half year on record: gold demand amounted to 2,335 tons in the first six months – an impressive figure. Even more interesting might be the demand composition: According to the World Gold Council, massive ETF inflows as well as investments in gold bars and coins counted for 1,064 tons of gold. As a result, investment made for nearly half of the demand – and for an absolute record figure. Never before has gold been used as investment this extensively for two consecutive quarters. Gold demand for investment purposes has risen by 141 per cent year-on-year in the second quarter of 2016 alone. During the same time, gold demand by the jewellery sector shrunk by 14 per cent, and technology sector demand decreased by 3 per cent. While the decrease in the technology sector has been a result of weaker device sales, the sharp decline in the jewellery sector has been caused primarily by the impressive rise of the gold price. Gold in US dollar gained 25 per cent in value during the first six months, making the first half of 2016 the strongest since 1980. Nevertheless, the gold price surge has not been as straight as it may seem: volatility reached 19.2 percent in the first half of 2016, ticking above average, compared to the long-term average of gold price volatility of 18 per cent.

Central banks, however, have not contributed that much to the massive rise in demand for gold investments. During the second quarter of 2016, central banks purchased 23 per cent less gold than during the same period of the previous year.  In spite of this, the value of the central banks’ gold holdings has increased dramatically due to the significant gold price increase.

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