Gold price resilient due to robust fundamentals: World Gold Council

Robust market fundamentals, including evidence of both stronger jewellery demand in India, growth in Chinese jewellery demand and sustained investor inflows, continued to support gold price performance during the first three months of 2010, according to the World Gold Council’s (WGC) latest Gold Investment Digest.

The report, which was published today, showed:

The gold price rose modestly during Q1 2010, ending the quarter at US$1,115.50/oz, on the London PM fix, compared with US$1,087.50/oz at the end of Q4 2009, as evidence of seasonally strong jewellery demand in India and China combined with continued global investment flows, provided a robust fundamental support to the gold price.

On a risk-adjusted basis, gold outperformed compared with the broader commodity complex and international equities, but slightly underperformed against US and emerging market equities in the first quarter of 2010.

Gold remained, on average, the least volatile of the commodities monitored by WGC1, with the exception of the S&P GS Livestock Index, with annualised average volatility falling to 17.6% from 20.0% in the previous quarter. By the end of Q1 2010, price volatility fell further to 14.8% on a 22-day rolling basis, below its historical average.

Investors bought 5.6 net tonnes of gold via exchange traded funds in Q1 2010, bringing the total amount of gold in the major physically-backed ETFs that WGC monitors to a new record of 1,768 tonnes, worth US$63.4 billion, at the quarter-end gold price2. Similarly, anecdotal evidence suggests that the over-the-counter market experienced net inflows while generally maintaining existing long positions