Gold investment increased while gold jewelry demand fell

Sales of gold as an investment soared worldwide after the Sept. 11 terrorist attacks in New York and Washington, but the rise in the third quarter was offset by weakness in the jewelry market, the World Gold Council (WGC) said Tuesday.

The WGC said that in the United States, sales of new gold coins, often seen as a safe-harbor investment in times of uncertainty, rose more than 400% to 3.5 metric tons in the July-September period from a year earlier. A metric ton is equal to about 2,205 pounds.

That offset a drop in the demand for gold for jewelry, resulting in total third-quarter demand in the United States of 104.4 tons, a 1% increase from a year earlier. For the first nine months of the year, demand for gold in the United States was 278.3 tons, a 3% rise from a year earlier.

Worldwide, a sharp decline in jewelry demand because of slowing economies outweighed the increase in gold for investment, the WGC said.

Global demand was 755 tons in the third quarter, down 7% from a year earlier, the WGC says. The figure was pulled down by weak demand for gold for jewelry. Investment demand was up 17% at 106 tons. For the first nine months of the year, demand was 2,356 tons, down 2%.

“Both the global slowdown and the aftermath of Sept. 11 affected demand in most countries, but the manner and extent of the effects varied widely,” the WGC said in a statement.

Some of the more noticeable trends were as follows:

* In India, Gold demand is 6% higher than it was in 2000. This is despite the six-week inauspicious period in the Hindu calendar, which started in August, and volatile prices following the Sept. 11 saw gold demand fall 17%. However, this only offset partly buoyant demand during the first half of the year.

* The removal of state control over retail jewelry prices helped gold demand in China rise 9% from year-earlier levels.

* Demand for gold in Japan rose 37% on the back of a 91% increase for investment purposes. The weak economy resulted in a 7% fall in jewelry demand, but this was tempered with a shift toward yellow gold and away from platinum, the WGC said.

* Gold demand rose in Vietnam, Indonesia, Malaysia, and South Korea, while demand fell in Thailand and Taiwan.

* A reduction in tourist and pilgrim purchases depended demand in much of the Middle East where gold jewelry purchases was down 7%, compared to 2000.

* Jewelry demand in the European countries remained stable, except in the United Kingdom where a 7% increase was reported, over 2000 levels.