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The price of gold increased by 16% since the start of the current year as of April 2016 closing the month at the level of $1,242 per troy ounce. This strong recovery of gold prices happened due to the surge in demand for gold, that was up 21% year-on-year in the first quarter of 2016 reaching 1,290 tons. The main driver of this increase was huge inflow in exchange traded funds (ETFs) - marketable securities traded on a stock exchange which tracks commodity prices, including gold.

The main factor that fueled the demand for the yellow metal is a high level of uncertainty observed in the global economy at the moment. People always rush towards refuge commodities like gold or silver when they think that something is going wrong with the economy. Now, there are at least three factors that undermined confidence in traditional asset classes and therefore improved sentiment towards buying gold: negative interest rates implemented in Europe and Japan, expectations about slowing of US interest rate rises, concerns about Eurozone disintegration and China's slowdown negative impact on global economy.

As the analysis of World Gold Council shows gold returns in periods of low interest rates are twice as high as their historical average. Moreover, in such environment gold seems to be more effective in portfolio diversification, mitigation of risk and long-term returns as compared to government bonds. So, in current conditions of low-to-negative interest rates demand on gold from investors and the central bank is going to continue strengthening moving the prices up. From the other side, prices growth is supported by moderate supply growth that constituted 5% on a year-on-year basis in the first quarter.

Dive deeper into historical commodity prices from the World Bank and IMF or commodity price forecasts.

You can also explore with Knoema a variety of other critical commodities, including:

gold | silver | copper | aluminum | nickel | zinc | coal | natural gas | crude oil

As you examine commodity prices and forecasts, you may also be interested in economic forecasts for the G20 countries across the following indicators: GDP growth | inflation | unemployment | government debt | current account balance | external debt.

 

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