-- Posted Wednesday, 15 August 2007 | Digg This Article

Dollar demand for gold in the jewellery, retail investment and industrial sectors all reached new heights in the second quarter of 2007. Global demand for gold jewellery showed the strongest surge, reaching a record $14.5 billion, 37% higher than Q2 2006, with particular strength across the key gold markets of Greater China, India, the Middle East and Turkey.

A return to more normal levels of gold price volatility, growing acceptance by consumers of a price that averaged 6% above the same period a year ago, and strong economic performances in the key consuming regions all helped gold to set records in the second quarter, according to Gold Demand Trends, released today by the World Gold Council (WGC).

In tonnage terms India, the world’s largest gold market, achieved all-time records in both jewellery and retail investment. Turkey achieved second-quarter records for both categories while Russia recorded its highest ever level of jewellery demand.

The figures, compiled independently for WGC by GFMS Ltd, showed that identifiable gold demand made a further substantial recovery in Q2 2007 from the impact of the volatile prices experienced in 2006, rising 19% in tonnage terms on Q2 2006 to 922 tonnes, and reaching $19.8 billion, a 27% increase, in value terms year-on-year.

James Burton, CEO of the World Gold Council, said: “We are pleased to report a very strong second quarter with demand for gold reaching unprecedented levels in a number of markets.  A reduction in price volatility in 2007 has resulted in increased consumer confidence and, coupled with greater industry marketing activity, led to record levels of gold jewellery purchases globally in dollar terms. I am pleased to note that the dollar value of gold demand has more than doubled in just four years.

“Several countries stand out.  The figures from India this quarter are particularly pleasing and we will continue to encourage India‘s ongoing love affair with gold.”

At 317 tonnes, India’s total demand for gold in Q2 2007 was equivalent to half the global mine output for the quarter.  More stable gold prices, a booming economy and the increasingly successful Akshaya Thritiya festival in April all contributed to a strong second quarter despite prices being in the mid-$600s/oz.

Strong economic growth, reduced price volatility and the auspicious Year of the Golden Pig saw China’s gold demand increase 32% in tonnage terms from year-earlier levels to 76 tonnes. 

In the Middle East, strong economies and stable prices influenced demand for gold which rose 20% in tonnage terms to 97.5 tonnes compared with the same quarter in 2006.  Turkey enjoyed second-quarter records for both jewellery, at 52.2 tonnes, and net retail consumption, at 20.5 tonnes, an increase of 14% and 5% respectively on the previous year. 

In Russia, where jewellery demand has grown steadily over recent years, consumption increased by 27% to 20.3 tonnes compared with Q2 last year.

Globally, net retail investment rose by 51% in tonnage terms to 132.9 tonnes, and 60% in dollar terms to $2.9 billion, compared to Q2 2006.  Total identifiable investment fell just 4.8% in tonnage terms to 130.4 tonnes and was 1% higher in dollar terms at $2.8 billion compared with Q2 2006.

Running counter to the generally stronger trend, investment in Exchange Traded Funds and similar products was negative over the quarter, with small net redemptions of 2.6 tonnes.  The redemptions were confined to the market leader streetTRACKS Gold Shares (ticker symbol GLD), and coincided with a much steeper decline in speculative long positions on the Comex division of the New York Mercantile Exchange. While the two vehicles are not directly comparable, GLD effectively followed the trend in the broader gold market, suggesting that investors and traders are increasingly accepting the ETF as simply another component of that market.  Renewed creations in GLD since the end of the period under review have carried assets to a new peak over 500 tonnes.

Global industrial demand saw a further steady increase over year-earlier levels of 2% in tonnage terms to 116.5 tonnes; this was equivalent to a 9% increase in value terms to $2.5 billion, a new quarterly record.  Electronics demand, which grew strongly in 2006, also recorded a further 2% increase in tonnage compared to Q2 2006. 

Gold supply remained constrained in Q2. Stable prices reduced the supply of scrap, and this served to offset increased central bank selling.

Gold Demand Trends figures are compiled independently for World Gold Council by GFMS Limited.  The full Q2 2007 Gold Demand Trends report can be viewed at:

http://www.gold.org/value/stats/statistics/gold_demand/index.html

ENDS

For further information and to receive country reports or the full Gold Demand Trends:

Matt Graydon, Head of External Relations, World Gold Council, on + 44 (0)207 826 4716, or e-mail matt.graydon@gold.org