PEOPLE have once again > started parking their surplus funds in gold; though tracing signs of a major shift from other avenues of investment is too difficult at this stage.

Purchasing of gold coins and bars rose 11pc from 3.1 tonnes in the first quarter of the last year to 3.4 tonnes in the first quarter of this year, according to the latest World Gold Council report. Jewellery buying surged 13pc during this period-from 5.3 tonnes to 6.0 tonnes.

Demand for gold coins and bars, as well as jewellery, has remained strong in each of the last three quarters of 2015 and in the first quarter of 2016, after hitting a low in the first quarter of 2015, latest stats released by WGC reveals.

`This demand growth definitely has some relation to falling yields on bank deposits and National Saving Schemes, levelling off of gains in the stock market and of people`s unawareness about good prospects of mutual funds`, says a former chairman of the Karachi stock exchange.

But according to bullion traders, local investment in gold has risen lately for two reasons. First, investors (or speculators) who were previously holding hard currencies have sold their assets to buy gold coins and bars after the tightening of rules for forex transactions.

And secondly, jewellery purchas-ing has gotten a boost from the oozing of a pent-up household demand that had remained suppressed due to poor law and order situation in Karachi, the hub of all commercial activities.

Besides, since local demand of jewellery has remained weak in India and in China for some time, `our businessmen have been importing jewellery in unusually big volumes to push up sales in posh areas, not only in Karachi but across Pakistan,` says an official of the Karachi Jewellers Association.

One can see in jeweIIers` market in Karachi how fast gold jewellery is catching up with artificial jewellery that earlier ruled the market. Demand for artificial jewellery remains intact, but ornaments made of gold and imported from India and China are becoming popular among wealthy customers in Karachi and Lahore, market sources say.

They also say the old trend of greater use of recycled gold is weakening for two reasons. First, some major banks have introduced schemes for personal loans against collateral of jewellery so that families` old jewellery, kept in bank lockers, are now being used for short-term borrowings.

Secondly, since the export of jewellery has seen a steep fall in recent years, purchase of old jewellery for recycling into exportable ornamentshas come me to a near halt. Though jewellery exports from Pakistan rose 29pc year-on-year in July-June 2015-16, export earnings of only $8.5m makes the growth rate insignificant.

Gold merchants say buying of gold bars and coins has also been rising because of greater activity in gold trading on Pakistan Mercantile Exchange Ltd. Similarly, some banks have introduced term deposit schemes that promise investment of depositors` money in gold bars and coins, and their returns to depositors.

State-run National Bank of Pakistan is one of them.

They say, however, that quarterly investment in gold in the shape of gold bars and coins that has ranged between 3.4-4.0 tonnes since Q2CY15 is far below the average investment seen some years ago. `If the recent pickup in global investment in gold and gold-backed assets continues for a while we can see our own gold buying in this category shoot up to 5.0 tonnes a year,` a Karachi-based bullion trader told this writer.

Quoting from figures from local sources that are yet to be fed into World Gold Council report, he said investment in gold bars and coins in Q2CY16 has hit close to 3.5m tonnes.

Similarly, investment in gold jewellery during this period has crossed 6.0m tonnes. But independent verificationof such stats is just too difficult.

In Pakistan, investment in goldbacked assets of mutual funds in general, and Sharia-compliant funds in particular, is also taking root, according to a senior official of Dubai Islamic Bank. That too can keep gold demand in this category high for some time to come.

Bankers, stock brokers, bullion traders and executives of forex companies say they see a clear demarcation of distinguishing lines emerging between various classes of investors.

`We`re about to see weakening trends in investment-hoping, at least on a large scale,` says a former president of a large local bank.

`Boom in one particular investment market these days does not attract all and sundry as in the previous years.

By and large, people are learning to play safe these days,` he said when asked if an uptick in demand for gold would attract investors of other major assets.

Bankers say over the years, the recent boom in the real estate market that began with the installation of the current government in mid-2013 and rising trend in gold demand indicates how unrecorded wealth is finding its way into various investment avenues. They say that an unusually high growth in the currency in circulation (about 3pc YoY in FY16) has been at the root of it. •