WGC sees gold demand 'robust' over remainder of 2010

TORONTO (miningweekly.com) – Demand for gold, which rose 36% year-on-year in the second quarter according to data from the World Gold Council (WGC), will remain “robust” during 2010, the industry body said on Wednesday.

Gold will be underpinned by accelerating demand from India and China, as well as increases in investment demand driven by ongoing economic uncertainty and concerns over public debt, the WGC said in its quarterly 'Gold Demand Trends' report.

The price of gold rose to a record above $1 260/oz during the second quarter, and was trading at $1 240/oz on Wednesday afternoon.

Demand for the precious metal rose to 1 050 t in the second quarter, mainly thanks to strong investment demand, which grew 77% in dollar terms, and 118% in volume terms, to 534,4 t.

The largest contribution to this rise came from the exchange-traded funds segment of investment demand, which grew by 414% to 291,3 t, the second-highest quarter on record.

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future,” WGC investment MD Marcus Grubb said.

“Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.”

As far as jewellery is concerned, demand remained relatively firm in the quarter, given the record high prices achieved during the period.

Jewellery consumption of gold was 408,7 t, just 5% lower than in the second quarter of 2009.

In India, the biggest jewellery market, demand slipped just 2%, to 123 t, which represents a 20% value of demand in local currency terms, to 216-billion rupees.

Chinese gold jewellery demand actually increased 5%, to 75,4 t, the WGC said.

“Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices,” Grubb commented.

“Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment.”

Looking ahead, India and China will be big drivers for demand growth, particularly for gold jewellery, for the remainder of 2010, the industry body said.

In the long term, Chinese demand for gold is expected to grow “considerably”, the WGC said.