Gold demand hit near record levels in the first quarter of 2016.

Despite the price rising nearly 17%, the demand for gold surged 21% in the opening quarter of the year. It was the second largest quarter on record, according to the World Gold Council.

Gold demand hit 1,290 tons in Q1. Concerns about economic instability and an uncertain financial landscape drove the increase. Investors flocked to gold, and ETFs saw a huge inflow of the yellow metal. Total investment demand hit 618 tons, up 122% from the same period in 2015:

Inflows into ETFs totaled 364 tons in the quarter – the highest quarterly level since Q1 2009 – compared to 26 ton in Q1 2015. Gold found favor as a risk diversifier due to the negative interest rate environment in Europe and Japan, combined with uncertainty over the Chinese economy, anticipation of slower interest rate rises in the US and global stock market turmoil.”

Demand for physical bullion was robust. Total bar and coin demand came in at 254 tons, up nearly 1%. There was some weakness in price sensitive markets, but it was offset by surging demand in the US, with a 55% increase, and the UK, with a 61% jump. Demand for bars and coins in China rose 5% in the quarter.

Central banks continued their gold buying spree in Q1, adding another 109 tons to their reserves in the quarter:

This represents the 21st consecutive quarter that central banks have been net purchasers of gold as they continue to diversify away from the US dollar.”

China, Russia and Kazakhstan led the way continuing an aggressive effort to add to their hoards.

Investment demand was more than adequate to offset a sluggish jewelry market. World Gold Council head of market intelligence Alistair Hewitt summed up gold’s overall performance in Q1 this way:

Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand, helping to push prices up 17% over the course of the quarter, as ETF inflows swelled. Conversely, jewelry demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42 day strike by jewelers in India. But we believe Indian demand has simply been postponed, with buying likely to increase for Akshaya Tritiya and the wedding season.”