Gold demand to strengthen in 2010

UK hallmarking showed gains across all precious metal types in the Birmingham Assay Office's February report.

Jewellery demand driven by India & China as Europe invests in bullion.

European demand for gold will be strong in 2010, according to a report delivered today by the World Gold Council (WGC).

The Gold Demands Trends report revealed that global gold demand will be robust this year driven by growing demand for jewellery in India and China, as well as an increase in European and US investment buying.

In Europe, concerns over Greece’s public finances and debt contagion fears led to increased investment buying of gold bars, coins and gold exchange traded funds in May, which the WGC said would boost Q2 figures.

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World Gold Council chief executive Aram Shishmanian said: “Currently, European gold investment demand is exceptionally strong, especially from German and Swiss investors. This is mainly attributable to concern over public debt levels in the Eurozone and the potential inflationary impact of the European Central Bank’s announcement of the US$1 trillion rescue package to purchase Eurozone government bonds to address the Greek debt crisis.

“With the global economic recovery still burdened by high and rising debt levels in Western economies, as well as the renewed threat of recession driving down the US dollar and equities, the outlook for gold as a liquid, reliable asset class and as a store of wealth remains highly favourable.”

Consumer demand for gold in India surged 698 percent to 193.5 tonnes in the first quarter of 2010, making it the strongest-performing market. Demand remained resilient in China despite rising prices and showed an uplift of 11 percent in the same period to 105.2 tonnes.

Both markets experienced high local gold prices in the quarter and the WGC said that consumers’ continuing spend suggested that the countries were becoming accustomed to higher prices.

According to the WGC, global jewellery demand in non-Western countries will continue to recover after reaching 470.7 tonnes in the first quarter. Economic recovery in Europe and the US will add to this demand, as a potential return to restocking in the jewellery sector is likely, given that existing inventories have been run down since the first half of 2009 to very lean levels, and this should provide "fundamental support to the gold price".

Shishmanian said: “The diversity of demand for gold, both by sector and geography ensures that the outlook for gold remains strong for the remainder of 2010. Despite increasing gold prices, consumers in China and India will continue to drive market growth, particularly in jewellery.

"In Western markets, the uncertain economic outlook and sovereign risk fears will add further impetus to growth in investment as investors seek to protect wealth. In the instance that we continue to see elevated levels of risk around the world, however, investment demand will remain strong in 2010.”

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