Gold demand falls 14% in second quarter

Overall gold demand fell 14% to 729 tons in the second quarter due to price rises and political and economic concerns, the World Gold Council said in its quarterly Gold Demand Trends report.

Purchases of gold for jewelry fell 16% to 581 tons from 690 tons in the same period in 2001 and demand for industrial uses at 74 tons was reduced by 6% from 79 tons in second quarter 2001, the report states.

A large part of the overall decline in jewelry purchases was due to a 37% fall in India, the world’s largest gold consumer, according to the report. This was mainly due to the rise in the rupee price of gold during the quarter.

“Indian demand is particularly sensitive to price movements; both trade and consumers hold back from purchasing in periods of price volatility,” the WGC said.

In countries where the economic situation was improving, jewelry demand was more buoyant, according to the report. Purchases in Indonesia and Vietnam were respectively 27% and 20% higher than a year earlier. Demand in Turkey, while remaining below the record levels of earlier years, almost doubled from the depressed levels seen in 2001.

Although overall gold demand was lower in volume terms, the dollar value of purchases was virtually unchanged at $7.3 billion, according to the report. This was a consequence of the rise in the US dollar price of the metal, which averaged $312.67 per ounce for the period—$45 per ounce, or 16.8%, higher than in the second quarter of 2001.

Industrial demand in all East Asian countries reported was universally higher than a year earlier, suggesting that recovery in the electronics sector could be under way, the report states.

Global retail investment demand was down in comparison to the same quarter of 2001. Political and economic concerns underpinned a strong increase in some countries but the rise in the price of gold also encouraged selling in others. Nevertheless, following a strong first quarter, retail investment during the first six months of the year was still 12% higher than in the first half of 2001.