World Gold Council’s gold demand trends for Q1

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Demand set to remain robust following a strong first quarter.

The World Gold Council (WGC) has published its gold demand results for the first quarter of 2011, describing a “robust” demand for gold, with evident geographic and sectoral diversity.

The statistics to date show that demand in Q1 totalled 981.3 tonnes, 11% up year-on-year compared to the 881.0 tonnes recorded in the first quarter of last year. This has been largely attributed to a widespread rise in demand for bars and coins, supported by an improvement in jewellery demand in key markets including China and India.

The average price for gold this quarter hit a record high of $1,386.27 (£855) per oz, marking the eighth consecutive year in which gold has seen a year-on-year increase. Prices climbed to record highs in March with new prices for the months of April and May.

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Demand for gold as an investment grew by 26% in Q1, hitting 310.5 tonnes compared to 245.6 tonnes in the same period of 2010. Again, the main growth came from bar and coin demand which increased by 52% year-on-year, to 366.4 tonnes. In value terms, this represented a near-doubling of demand to $16.3bn (£10bn) from US$8.6bn (£5.3bn) in Q1 2010.

Jewellery demand in the first quarter of 2011 showed a gain of 7% from year earlier levels of 521.3 tonnes to reach 556.9 tonnes. India and China, the two largest markets for gold jewellery, together accounted for 349.1 tonnes or 63% of the total, a value of US$16bn (£9.8bn). China’s jewellery demand reached a new quarterly record of 142.9 tonnes, an increase of 21% from 118.2 tonnes in Q1 of 2010.

In terms of supply, the first quarter of tghe year has seen a deline of 4% year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010. This decline was due to a sharp increase in net purchasing by the official sector and a fall in the supply of recycled gold, which was down 6% on year-earlier levels to 347.5 tonnes from 369.3 tonnes in the first quarter of 2010. Gold production from mines showed an increase of 44 tonnes year-on-year, a growth rate of 7% from year earlier levels.

Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010.

The WGC has offered a number of factors which may affect how the gold market will fare for the rest of the year.

Continued unrest in the Middle East and North Africa, paired with socio-economic factors will certainly drive iinvestment for gold. Economic uncertainty in the U.S., debt in Europe and inflationary pressures are all due to affect demand.

Likewise, demand from the Chinese and Indian jewellery markets will underpin growth in demand, with the wedding season in India and extensive purchasing during price dips from both countries.

The banks are also set to affect demand, with many central banks using gold as a mean of “diversifying their reserves” as an asset which has not credit or counterparty risks.

 

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