THE gold market in the UK enjoyed a Brexit bounce last year as investors moved to shield their purchasing power from sterling's slump.
The World Gold Council (WGC) said the UK's total bar and coin demand jumped 28 per cent to 10.9 tonnes in 2016, as British investors took shelter from the pound's 16 per cent slide against the US dollar and 12 per cent fall versus the euro.
Global gold demand reached a three-year high, rising 2 per cent to 4,308.7 tonnes over the period, while annual inflows into exchange traded funds hit the second highest level on record at 531.9 tonnes.
It came as investors sought safety amid a turbulent backdrop of negative interest rates, heightened concerns over monetary policy and intense political uncertainty surrounding Brexit and the US presidential election.
Alistair Hewitt, head of market intelligence at the WGC, said for UK investors "protecting purchasing power from currency depreciation really came to the fore" last year.
On the global picture, he added: "2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold.
"Retail investors - having been subdued for most of the year - responded quickly to the price fall in the fourth quarter, a fact reflected by a surge in demand in the physical market."
The WGC report said investors turned their attention to Europe in the third quarter, as they looked ahead to elections in the Netherlands, France and Germany.
Around 114 tonnes was added to their holdings amid fears that anti-EU candidates could emerge victorious in the Dutch and French elections, rocking the foundations of the European Union.
However, India and China saw consumer buying tail off in 2016, dropping 21 per cent and 7 per cent respectively.
India's surprise demonetisation policy - where 500 and 1,000 rupee notes were outlawed by the Government - hampered retail investments and jewellery buying, while the high gold price also hit jewellery demand in China.
"The Indian market faces many challenges in 2017," Mr Hewitt added. "We anticipate many of the headwinds that affected demand in 2016 to continue into this year, but we are confident that the Government's move towards a more transparent gold market will ensure that gold remains an important asset class for millions of people."
The global demand for jewellery dropped 15 per cent to 2,042 tonnes in 2016, down from 2,389 tonnes in 2015.
Central Bank demand also fell by a third to 384 tonnes last year in contrast to 577 tonnes the year before.
Looking ahead, Mr Hewitt added: "With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant."