Gold demand jumps on higher investment Wed May 20, 2009 9:52am BST By Frank Tang NEW YORK (Reuters) - Global demand for gold jumped 38 percent year-over-year to 1,015.5 tonnes in the first quarter as sharply higher buying in gold investment products more than offset depressed jewelry consumption and industrial usage, according to an industry report released on Wednesday. "In the current market circumstances, I am not surprised by any increase in gold investment," George Milling-Stanley, managing director of the World Gold Council, told Reuters prior to release of its quarterly "Gold Demand Trends" report. Milling-Stanley said gold benefited from a combination of safe-haven buying, inflation-hedge demand and diversification into gold to reduce overall volatility of investment portfolios amid one of the worst financial crises in history. "We have also seen a move from capital appreciation toward wealth preservation," he said. The WGC is a trade group funded by the gold mining industry to promote the metal. Identifiable investment, which includes the popular gold exchange-traded funds (ETFs) and bullion coins, rose to 595.9 tonnes for the quarter, more than triple that of the 171.3 tonnes in the year-ago quarter. ETFs were the biggest contributor to investment inflows for the first quarter, while bar and coin demand was the main driver in the last two quarters of 2008, the report showed. Bullion holdings of SPDR Gold Trust, commonly known as GLD among traders, rose nearly 350 tonnes, or 50 percent, to 1,127.44 tonnes by the end of the first quarter. GLD is by far the world's biggest gold-backed ETF, accounting for more than 80 percent of all such investment funds. "It is not a case of ETF demand replacing other gold investments, but it has been genuinely additive to gold investment," Milling-Stanley said. JEWELRY, INDIA DEMAND TUMBLE Total jewelry consumption in the first quarter dropped 24 percent to 339.4 tonnes year-on-year, dampened by higher gold prices and the global economic slowdown, WGC said. Historically, jewelry demand accounts for more than half of the total gold demand. Total consumer demand in India, which has traditionally been the world's No. 1 gold buyer, tumbled 83 percent year-on-year to 17.7 tonnes for the first quarter. Global industrial and dental gold demand also slid 31 percent to 80.2 tonnes for the quarter as recession broadly hurt world production. "If the world economy does not show any signs of recovery, you are likely to see a continuation of subdued jewelry demand and demand for industrial application," Milling-Stanley said. "I would look for things that were driving gold investment demand in the first quarter to continue in the second quarter," he said. (Editing by Christian Wiessner) |