Demand for gold soared in 2016, driven by concerns and uncertainty driven by politics, according to the World Gold Council's latest report.
Demand for gold increased by 2 percent, or 92.9 tonnes, to reach a three year high of 4,308.7 tonnes in 2016. It was also the second best year for ETF inflows on record, with 532 tonnes added, according to the latest Gold Demand Trends report from the council.
All this demand helped the gold price to rise by 25 percent by the end of September. Even though gold prices pared these gains in the fourth quarter after Donald Trump's conciliatory acceptance speech and the Federal Reserve's interest rate rise, gold still finished 2016 up 8 percent.
The Brexit referendum in the U.K. and the U.S. election created an "unprecedented degree of political upheaval," which supported inflows into gold investments, according to Alistair Hewitt, head of market intelligence at the World Gold Council.
"Retail investors – having been subdued for most of the year - responded quickly to the price fall in Q4, a fact reflected by a surge in demand in the physical market," he said in a press release.
"With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant."
In addition, demand from China rose 25 percent last year. This was the result of the yuan weakening against the dollar, leading high-net worth individuals to hedge against the currency fall.
The softer gold prices in the last quarter also boosted demand in advance of the Chinese Lunar New Year, which took place on January 28.
This rising demand has helped gold to start off well in 2017. Since the beginning of the year, gold prices are up 5.29 percent and the precious metal hit an 11-week high this week. On the other hand, gold is highly sensitive to interest rates and markets are pricing in two or three rate hikes by the Federal Reserve this year.