Investors bought a record 469 t of gold through exchange-traded funds (ETFs) during the first three months of this year, as ongoing risk aversion, uncertainty over consumer price outlook and an appetite for effective portfolio diversification supported supported investment demand for the yellow metal, the World Gold Council said last week.

The previous quarterly record for gold ETF inflows was 145 t, set in the third quarter of 2008, the industry body said in its latest Gold Investment Digest.

“One reason the financial crisis has been so devastating for investors is that many alternative assets did not deliver on the promise that they would provide portfolio diversification,” said WGD head of investment for North America and author of the report Natalie Dempster.

“The same cannot be said for gold. Gold has been one of the few assets that has genuinely provided investors with diversification throughout the financial crisis,” she said.

The gold price rose just 5% in the first quarter, to end the period at $916,50/oz, on the London PM fix. However, this was in contrast to a 12% decline in US stock prices during the three months.

“Anecdotal reports from coin and bar dealers also point to another very strong quarter in retail demand for coins and bars in the first quarter of 2009, after a 396% year-on-year increase in fourth quarter 2008,” the WGC said.

Dealers have continued to report shortages in the availability of official coins and small bars.

The gold price was less volatile in the first quarter, at an average of 29,2% on a 22-day rolling basis, compared with 44,8% in the fourth quarter.

“Having eased slightly over the quarter, the volatility still remained well above gold’s long-run price volatility of around 13%,” the WGC added.

However, gold prices are still less volatile than most of the rest of the market. For example, the volatility of the S&P500, also measured on a 22-day rolling basis, ended the first quarter at 49%.

Gold was trading at around $890/oz on Wednesday afternoon

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