Gold demand for jewelry fell 21 percent year-over-year to 445.4 metric tons for the first quarter of 2008—the lowest quarterly level on record since the early 1990s, according to the quarterly Gold Demand Trends report from the World Gold Council. In dollar terms, however, it was up 12 percent to $13.2 billion.

Against a worsening economic background for consumers in the U.S. market, overall demand for gold fell 15 percent to 48 tons, according to the report.

India, the largest market for gold and also the most price-sensitive, continued to suffer from the impact of high and volatile prices, according to the WGC report. Jewelry demand was at 71 tons for the period, half the level it was during the first quarter of 2007.

Positive news came from two of the world’s biggest emerging economies with overall demand for gold in China and Russia up 15 percent and 9 percent, respectively, driven by increasing consumer wealth and ease of access to attractive jewelry and retail investment products, according to the report.

“Early indications are that jewelry demand is likely to remain muted during the second quarter, although there has been positive news from the Indian Akshaya Thritiya festival and the Indian and Middle East wedding seasons, which are expected to generate additional purchasing.” James Burton, chief executive officer of the WGC, said in a statement.

Overall, gold demand fell 16 percent to a five-year low of 701 tons in the first quarter of 2008 as the rapid run-up in prices crimped buying of physical stocks of the metal, according to the WGC report.

Net retail investment demand fell 35 percent to 72.7 tons, according to the report. Industrial and dental demand fell by 5 percent to 110.3 tons, due largely to the deteriorating state of the U.S. economy and a decline in demand for consumer electronics.

There was a stark contrast in the gold exchange traded fund (ETF) market, however, where a combination of continuing instability in the equities markets, ongoing fears over the dollar and rising inflation, and increased understanding of gold’s investment attributes helped spur demand, according to the report. Demand for gold ETFs was up 100 percent for the period at 73 tons—representing $2.2 billion in dollar terms.

JCK