Gold price surge fueled by strong ETF demand – Commerzbank

In the middle of next week, the World Gold Council (WGC) will publish its report on gold demand in the first quarter. This is likely to show that the sharp rise in the gold price in the first three months of the year was driven by strong investment demand. It is already known that gold ETFs recorded inflows of 226 tons in the first quarter, Commerzbank's commodity analyst Carsten Fritsch notes.

Jewellery demand drops amid price spike

"This alone should provide a strong boost to investment demand, as there were only small inflows in the previous quarter and even noticeable outflows in the same quarter of the previous year. Jewellery demand, on the other hand, is likely to have suffered from the sharp rise in prices, as the weak gold imports to India and China already suggest."

"The picture is completed at the beginning of the week by the gold trade data between Hong Kong and China for March. Another interesting aspect of the WGC report are central bank gold purchases. As the majority of purchases have been carried out unreported for almost three years, the available monthly data only represents a small portion."

"However, the high purchase levels of the previous quarter and the same quarter of last year are unlikely to be reached, when the central banks bought more than 300 tons of gold each time. The WGC report is not expected to have a price impact though. Instead, the gold price is likely to continue to be driven by the high level of uncertainty."