Gold is regaining its luster after a dismal year, with the largest bullion-backed exchange traded fund seeing a surge in holdings to a seven-week high, as investors turned to the precious metal to hedge against volatile market conditions and Chinese consumption picks up.

The SPDR Gold Shares (NYSEArca: GLD) held 25.9 million ounces of gold as of Feb. 13, compared to a low 25.4 million ounces in mid-January, and the ETF’s gold holdings are now hovering at their highest level since Dec. 20, according to SPDR Gold Shares.

Julian Phillips, founder of and contributor to, points out that GLD has purchased 529,109 ounces of bullion over the past month and saw zero sales, reports Myra Saefong for MarketWatch.

“This is tremendously significant because sales of physical gold from these U.S. gold ETFs and from the leading U.S. banks totaled 1,300 metric tons in 2013,” Phillips said in the article. “This formed a key source of supply for gold. All of it went east to Asia never to return again.”

Consequently, the shift to greater demand and limited supply is supporting gold price gains.

In China, “demand continues at a rising pace at a level between 2,400 and 2,800 metric tons including local supply, per annum,” Phillips added. “After the Lunar New Year, demand has jumped again [and]as the Chinese middle classes rise in numbers and in wealth, they will continue to buy more and more.”

Meanwhile, weakness in the equities space pushed investors to “more attractive as an investment, while lower yields mean that the opportunity cost of holding gold has lessened,”  Mitul Kotecha, head of global FX strategy at Credit Agricole, said in a note.

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