Gold Surges From Investment

By JCK Online Staff -- JCK Online, 5/26/2009 11:05:00 AM

In the first quarter of 2009, gold once again surged upwards. Inflationary fears and uncertainty in financial sectors gave the precious metal a total demand rise of 38 percent year on year to 1,016 tonnes, representing a 36 percent rise in value terms to $29.7 billion, according to figures published recently by the World Gold Council (WGC) in its Q1’09 Gold Demand Trends report.

The WGC report attributes gold’s investment demands to exchange traded funds, (ETFs) and bars and coins, as the major source of growth in the quarter, reaching 596 tonnes, up 248 percent in first quarter of 2008.

Although investor demand was up, the recession continues to dampen consumer gold jewelry purchases as well as industrial demand. Gold jewelry demand dropped 24 percent compared to the same period last year with high prices of gold, shrinking discretionary budgets and depressed economic conditions as the main culprits for the decrease in demand.

Total demand even in India, traditionally the world’s largest gold market, declined 83 percent compared to the same period in 2008 from record rupee prices and a major deterioration in the domestic economy. The Middle East market dropped 26 percent as well because of high gold price and a tightening of consumer spending.

The only exception to global consumer demand was China. The Mainland showed a 3 percent growth in gold jewelry demand.

Closer to home in the U.S. market, retail demand was up for investment, but jewelry demand fell by 30 percent compared to the same period last year.

“The shift in the balance of demand that we have witnessed this quarter, where the gold price has risen despite a severe drop in jewelry and industrial demand, perfectly demonstrates the robust nature of gold’s fundamental supply and demand dynamics,” Aram Shishmanian, WGC CEO, told the press.

Aram Shishmanian, WGC CEO