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Gold demand up 6% in third quarter

Source : IBNS
Last Updated: Thu, Nov 17, 2011 14:23 hrs
Gold demand up 6% in third quarter

Mumbai, Nov 17 (IBNS) Gold demand in the third quarter of 2011 reached 1,053.9 tonnes, an increase of 6% compared to the same period last year. This equates to US$57.7bn, an all-time high in value terms.

According to the World Gold Council's Gold Demand Trends report for Q3 2011 released on Thursday, this increase was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating record quarterly demand of US$25.6bn.

The report also details a number of other developments:



Investment demand in Europe reached a record quarterly value of E4.6bn, equating to 118.1 tonnes - a year-on-year increase of 135%.

The increase in overall investment demand was all the more impressive given the sharp gold price correction in September, which encouraged a wave of profit taking among bar and coin investors. Virtually all markets saw strong double-digit growth in demand for gold bars and coins.

Chinese jewellery demand was 13% higher year-on-year at 131.0 tonnes, equivalent to RMB46.0bn. The bulk of this increase was seen in smaller cities as retail chains expanded their networks to meet increasing demand fuelled by rising income levels.

China's growing appetite for gold as a means of investment saw demand for gold bars and coins expand by 24% from year earlier levels to 60.2 tonnes.

Jewellery demand in India was sluggish during the seasonally slow months of July and August, compounded by high inflation and greater volatility in the local gold price. Buying has since recovered slightly with the onset of the festive and wedding season.

Overall, Indian jewellery demand in Q3 saw a 26% decline in tonnage, when compared to the same quarter in 2010, to 125.3 tonnes, however yearly demand to the end of September is very close to the record levels seen in 2010.

Marcus Grubb, Managing Director, Investment at the World Gold Council commented: "Unsurprisingly investment demand for gold was a key driver during the third quarter. Increasing levels of inflation, the US credit rating downgrade, a worsening eurozone sovereign debt crisis and the lacklustre performance of many assets drove investors to increase holdings in gold in order to protect their wealth.

"Given gold's proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating.

"The long-term fundamentals for gold remain strong with a diverse and growing demand base coupled with constrained supply-side activity."

Gold Demand Statistics for Q3 2011:

Global gold demand in the third quarter of 2011 increased 6% year-on-year to reach 1,053.9 tonnes, up from 991.1 tonnes in the third quarter of 2010. Gold demand in value terms was worth a record US$57.7bn up from the previous high of US$45.7bn in the preceding quarter.

The quarterly average price rose 39% from year earlier levels to US$1,702.12, while the gold price reached a new record of US$1,895.00 (London PM Fix) on 5th and 6th September.

Global gold investment demand reached 468.1 tonnes in the third quarter of 2011, up 33% from 352.1 tonnes in the corresponding quarter in 2010. The rise in prices led to a record US$25.6bn in value terms, almost double the US$13.9bn witnessed in Q3 2010.

Demand for gold bars and coins increased 29% to reach 390.5 tonnes, up from 303.0 tonnes in Q3 2010. In value terms demand for bars and coins in Q3 2011 equated to US$21.4bn compared to US$12.0bn in Q3 2010.

Gold ETFs and similar products witnessed inflows of 77.6 tonnes in the third quarter of 2011, which was 58% above year-earlier levels of 49.1 tonnes.

Global demand for gold jewellery of 465.6 tonnes in the third quarter of 2011 was 10% below year-earlier levels of 518.9 tonnes. In value terms demand reached a quarterly record of US$25.5bn, 24% higher than the third quarter of 2010, which registered US$20.5bn.

In spite of challenging market conditions, gold demand from the global technology sector showed significant resilience and was flat year-on-year at 120.2 tonnes. In value terms demand from the electronics sector was equivalent to a record US$4.8bn.

Central bank net purchases amounted to 148.4 tonnes, as they continued to increase their allocation to gold as a percentage of total reserves.

Gold supply was 1,034.4 tonnes in the third quarter of 2011, 2% higher than year-earlier levels of 1,013.0 tonnes. Mine production increased by 5% to 746.2 tonnes from 710.9 tonnes during the third quarter of 2010.

Despite record prices being reached during the quarter, recycling activity was relatively modest. Third quarter 2011 gold recycling accounted for 426.5 tonnes of supply, up 13% year-on-year from 379.1 tonnes.

Gold demand statistics for India:

India largest market for gold despite sluggish economy

India which has been the largest jewellery market experienced a reduction in tonnage, a result of high and volatile prices

Despite consumer confidence being knocked by the persistence of high domestic inflation rates, India was the largest market on a global scale in the third quarter of 2011 with the total consumer demand for gold reaching 203.3 tonnes.

Indian demand for gold jewellery declined 26 per cent year- on- year to 125.3 tonnes from 168.4 tonnes in Q3 2010.

In value terms, however demand was higher at Rs. 31450 crores an increase of 2 per cent.

Investment demand comprising of bars and coins as well as ETFs accounted for 78 tonnes in Q3 2011. Despite an 18 per cent year- on- year decline in investment demand from 95.5 tonnes in Q3 2010, India continued to remain the largest market for gold bars and coins in the third quarter of 2011.

In value terms, investments in Q3 2011, totalled to Rs 19,850 crores.

On a 2011 YTD (January - September) basis, Indian gold demand increased by 7.45 tonnes in volume terms as compared to the same period in 2010.

In value terms the growth on YTD basis was 37.6 per cent.

Indian demand for gold jewellery declined only 0.16 per cent on YTD basis to 464.4 tonnes from 471.9 tonnes in Q3 2010.

However investment demand comprising of bars and coins as well as ETFs accounted for an increase by 25.5 per cent in volume terms on YTD basis to 296 tonnes from 235.8 tonnes in Q3 2010.

Gold in Year 2011:

Gold jewellery demand was sluggish during the seasonally slow months of July and August 2011 which was preceded by the inauspicious "Shradh" period in the Hindu calendar.

Consumer confidence in India has been knocked by the persistence of high domestic inflation rates. Inflation of almost 10 per cent, as measured by the Wholesale Price Index (WPI) has adversely affected jewellery demand through its impact on both disposable income levels and consumer sentiments.

Ajay Mitra, Managing Director, Middle East and India, World Gold Council said: "The third quarter of 2011 has seen some difficult times for gold not just in India but around the world. Double- digit inflation coupled with depreciation of the Indian Rupee versus the Dollar have exaggerated the demand the fall in the demand for gold.

"The upcoming festive season however is expected to usher an increase in the demand for gold as we look forward to periods of increased price stability resulting in Indian consumers being able to build gold purchases in to their household budgets."

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