Gold bug? You’re not alone as gold demand sets new record

Gold demand sets a new record
Cost of holding gold is falling: Hannam & Partners
I've been bullish on gold for years: Dennis Gartman

Investors' rabid appetite for gold is showing no signs of abating, as figures from the World Gold Council show record investment in the first half of 2016.

The trend for exchange-traded funds (ETFs) to pile in to the precious metal, a classic safe haven amid uncertainty in the global economy and the search for yield, sent the price of gold soaring by 25 percent in the first half of the year, the biggest price rise since 1980. For the first time ever, investment, rather than jewelry, was the largest component of gold demand for two consecutive quarters.

Demand by investors set a record of 1,064 tons during the first six months of 2016. For comparison, this was 16 percent higher than in the first half of 2009, when the financial crisis raged.

At the moment, geopolitical uncertainties include: unrest in the Middle East; the fallout from the U.K.'s vote to leave the European Union; the U.S. presidential elections and the Italian banking crisis.

Individual investors, faced with historically low interest rates on savings accounts and concerns about the future of the economy, have also been buying up gold bars and other small gold investments like the U.S. gold Eagle coins – demand for which has jumped 84 percent this year.

On the other hand, the jewelry market was described as "anemic" by the World Gold Council.

While the price shows little signs of abating, some analysts are concerned that the activity has been driven so strongly by ETFs getting back in to the market, that demand will drop away quickly once there are signs of a recovery.

"Gold, like Paris, is always a good idea but we worry that too much of the recent move has come from ETF demand. What the margin clerk giveth, he or she also taketh away," Nicholas Colas, chief market strategist at Convergex, wrote in a research note.