Global demand for gold reached a four-year high in 2016 at 4,309 tonnes, according to reports by the World Gold Council (WGC). The surge was largely attributed to inflows of 532 tonnes into gold-backed exchange-traded funds (ETFs), which track the spot price of gold. Alistair Hewitt, head of market intelligence at the WGC, said that 2016 was a year of “unprecedented degree of political upheaval”, citing the shock Brexit vote, Trump’s presidential win, and the upcoming national elections in Europe as some notable examples. Low or negative interest rates, along with the weaker yuan also helped boost investment demand in gold by 70 per cent. Gold is traditionally seen as a safe haven in turbulent times, and price movements are often telling signs of investor anxiety.
Motivated by rising demand and prices, miners have started exploring for gold again in what seems like the first time in many years. On Monday, gold mining shares advanced for the seventh consecutive day, marking the longest winning streak for gold miners since August 2014. Rob Sica, director of global metals at TD Securities, said that “the acceleration of protectionism and ‘currency war’ chatter” in the geopolitical sphere were key in driving gold prices upward.
Rising gold prices have also affected related industries. Jewellery demand hit a seven-year low of 2,041.6 tonnes in 2016, with Chinese and Indian consumers buying less jewellery as the price of golf increased by 2 per cent between January and September. Central bank purchases were also at their lowest since 2010, partly because of increased pressure on foreign exchange reserves.