When gold prices plunged in 2013, the main reason would be a mass liquidation from the gold being locked in exchange-traded funds, which shed a staggering 880 tonnes from the metal.
ETF buying was very limited in 2014 and 2015 as investors had minimal curiosity about the gold sector. However it has come back in a large way to date in 2016, with ETF gold holdings rising by more than 270 tonnes. That actually works to about nine per cent of annual gold mine production.
The rebound in ETF demand has very positive implications for that sector, based on analysts at TD Securities.
“This strong investor and physical demand for gold has been a key driver in sustaining this rally (in gold prices), as well as an indication that investor demand has turned positive for gold,” i was told that inside a note.
The analysts noted this is actually the first “sustained” duration of inflows into gold ETFs since they peaked in late 2012. And they noticed that gold demand outside the ETF continues to be very strong too.
“Physical demand from customers has been strong to start the year in India and China, and interest in gold eagle coins within the U.S. was up 209 per cent over the first two months year-over-year,” they said, citing Metals Focus.
