For gold investors, the rising market volatility is no match for the currently growing economy, with gold holdings slumping to a decade low, according to the World Gold Council (WGC).
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The yellow metal is widely regarded as a safe haven investment, something that is purchased to guard against geopolitical and economic uncertainty. While the economy is performing well, in the first quarter market volatility increased. But, according to the WGC data, that didn’t encourage investors to seek safety by purchasing gold.
The WGC reported that global gold demand fell to its lowest first-quarter level since 2008, falling to 973 metric tons in the first quarter of 2018, a 7% drop compared to the 1,047 metric tons in the first quarter of 2017.
“A relatively stable gold price and rising interest rates contrasted with sharp equity-market volatility and periods of heightened geopolitical risk to create mixed signals for gold investors” in the first three months of this year, the WGC report said.
First-quarter global bar and coin demand declined 15% from the same time last year, with demand from China falling 26% year over year. China is the world’s largest bar and coin market and the big drop in demand for gold from the country is seen as a reaction to the stabilizing yuan.
When the yuan rallies, Chinese investors tend to purchase gold to safeguard their net worth.
Inflows to gold-related Exchange Traded Funds were battered, dropping to 32.4 metric tons from 96 metric tons year-over-year, a 66% drop.