Investment demand for gold has grown, on average, 15 percent annually since 2001, according to the World Gold Council.

In its latest analysis of the gold market, the WGC notes that downturns in the overall financial markets provide a boost to investing in gold as a safe haven to protect assets.

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“The price of competing assets such as bonds, through interest rates, currencies and other assets, influences investor attitudes toward gold,” according to the WGC.

The financial gold market is made up of bars, coins, gold-backed exchange-traded-funds, or ETFs, and central bank reserves. Physical gold holdings of 38,800 metric tons account for just 20 percent of the financial market holdings of the metals.

The WGC suggests that 92,000 metric tons of physical gold is held worldwide in jewelry form.

The WGC estimates that physical gold holdings by investors and central banks are worth approximately $2.9 trillion in U.S. funds with an additional $400 billion U.S. in open interest through derivatives traded on exchanges or over-the-counter.

Derivatives are not physical gold but only contracted claims against a counter-party such as a broker or bank.

“Gold trades between $50 billion US and $80 billion US per day through spot and derivatives contracts over-the-counter,” according to the WGC. “Gold futures trade $35 billion US to $50 billion US per day across various global exchanges. Gold-backed ETFs offer an additional source of liquidity, with the largest US-listed funds trading an average of $1 billion US per day.”

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