The World Gold Council reported on significant trends in the gold market during Q1 2017. The numbers collected and analyzed by this leading industry organization indicate that many of the more savvy investors are continuing to build strategic positions in the yellow metal. Specifically, they indicate that demand for gold bullion bars and coins rose more than 9 percent compared to 2016. The buying trends were most prevalent in Europe, where political and economic crisis have driven investment in safe have assets, such as gold. 1
Why Invest in Gold?
Purchasing gold bullion bars and coins is seen by many investors as an excellent way to meet a number of important objectives. First, of course, gold is an alternative investment that is popular as a diversification asset. There are several other reasons gold is a good investment in 2017:
- An excellent protection against inflation and loss of purchasing power
- A hedge against the growing concerns over fiat currency
- A way to provide confidential and highly liquid holdings
- A reserve to be used in situations where cash has limited or no value
Combined, these features are part of gold’s historic allure as a preferred private reserve of wealth. By providing both security and the potential for long-term growth, gold is valued in all cultures, governments, and economies.
Driving this interest in gold is a continued lack of comfort over global and economic issues, from Brexit to the stability of the euro to the ongoing lack of return on traditional assets. The WGC notes as an example that the two-year yield on debt issued by the German government is at the lowest level ever recorded.
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Who’s Investing in Gold?
Buyers in India, China, and other nations join U.S. investors in their positive views on gold bullion and coins. This combined demand generated the buying of nearly 290 tons in the first quarter, representing an investment of more than $11 billion. The WGC notes that this growing demand was actually building on the activity of Q3 and Q4 of 2016.
Chinese buying led the pack with a 30 percent Q1 increase over the same period last year. Growing tremors in the Chinese real estate market and the yuan devaluation are two factors this strong performance is attributed to.
Although gold is an important part of Indian culture, the nation has endured a major liquidity squeeze due to government demonetization efforts. However, even in this nation, demand was up in Q1. Analysts predict significant demand for gold as the cash situation improves.
U.S. Gold Demand to Rise?
In the United States there was some profit taking in the gold segment during Q1, resulting in a dip in demand for imported bullion coins and other items. However, the report notes the growing expectation of a stock market correction, which would quickly reverse that trend.
With positions in gold bullion and coins increasing, many investors are seeking both protection and potential long-term appreciation in their gold holdings.