Gold prices remain low in historical terms, despite a rally at the start of this year, but demand may yet appear from an unexpected source.
Some precious metal experts see interest returning to Europe, in part because the push towards negative interest rates has made depositing cash with banks less and less rewarding.
"Although gold is very much driven by U.S. Federal Reserve (Fed) policy, the impact of European Central Bank (ECB) policy decisions may become increasingly relevant for gold price action, as concerns about negative interest rates gain traction among investors," UBS strategist, Joni Teves, said in a report this month.
Negative rates on the ECB deposit facility mean commercial banks are effectively charged to store cash with the institution. Once again, the ECB cut its three main interest rates in March, slashing the deposit rate by 10 basis points to negative-0.4 percent.
"There has been some interest in physical gold out of Europe so far this year, albeit demand has been sporadic and volumes do not particularly stand out as yet. Should concerns about negative interest rates become more widespread, this could trigger an increase in physical gold demand out of Europe," Teves said.
Last year, demand from Europe constituted only 9 percent or 295 tons of global consumer demand for gold, of which 42 percent came from Germany and 18 percent came from France, Italy, Spain and Austria combined, according to Teves.
An uptick in demand from Europe could consolidate gold's reputation as a "safe haven" or alternative asset.
"As you don't get a return on money at the bank, the fact that gold doesn't give you a return is not a negative anymore… Gold hedges other risks than just inflation; deflation is just as good," Robin Griffiths, chief technical strategist at the ECU Group, told CNBC TV on Tuesday.
Arguments against holding physical gold include its historical price volatility and the cost of storage.
The price of physical gold and gold futures has rallied this year and exchange traded funds (ETFs) tracking the metal or mining companies have enjoyed strong inflows, in part due to increased risk aversion and continuing ultra-low rates from the Fed, the Bank of Japan and the Bank of England, as well as the ECB. The price of spot gold is up more than 15 percent on the year to trade at roughly $1,220 per ounce.
A four-year downturn in prices means the precious metal remains far off the peaks of around $1,900 per ounce hit in 2011. However, Griffiths said that if gold breached $1,350 again, it could hit new all-time highs.
Ross Norman, CEO of gold dealer Sharps Pixley, told CNBC on Tuesday that he was seeing strong demand from U.K. consumers for small bars of gold priced from £35 ($50) and kilobars priced at around £30,000.
"Many of our clients are high-net worth investors concerned about the economy — or ordinary 'joe public' investors who are equally concerned and amazed you can simply walk in and just purchase a bullion bar," he told CNBC by email.
In a sign of institutional interest, Munich Re, a leading reinsurance firm based in Germany, said it was diversifying into gold and currencies due to the negative rate environment, earlier this month.
"The side effects of the ECB policy are of course now having quite devastating consequences. I think they are solving the wrong problem with the wrong remedies," Chief Executive Nikolaus von Bomhard said, according to a translation posted on the Munich Re website.
Gold sales by European central banks have slowed in recent years, but there is little sign they will seek to imitate the large purchases made by some emerging market central banks, particularly in Asia.
Some European central banks with large portions of their physical gold reserves abroad are repatriating them, in part due to the changing security picture in the region. Notably, the German Bundesbank transferred 210 tons of gold to Frankfurt from Paris and New York last year and plans to transfer a further 307.4 tons by 2020.
However, the Swiss public voted in a referendum in 2014 against a measure that would have forced the central bank to hold a minimum of 20 percent of its reserves in gold, after the Swiss National Bank, the government and parliament came out against the move.