The Hindu Business Line : High prices hit gold sales in Q1, says WGC

Mumbai, May 20 Not unexpectedly, worldwide physical demand for gold (jewellery, coins and bars) suffered a setback in the first quarter of 2008, with volume down 16 per cent to about 701 tonnes.

In dollar denominated value terms, demand for the yellow metal reached $20.9 billion, up by a fifth from the corresponding period last year; and more than double the level four years ago.

Going by early indications, jewellery demand is likely to remain muted in the second quarter, a spokesman for World Gold Council (WGC) said at the time of Gold Demand Trends’ first-quarter report release.

With unsettled conditions in financial markets continuing and inflation catching up, gold continues to be buffeted by uncertainties.

Yet, its traditional role as a hedge against inflation and safe haven investment has ensured continued investor interest.

Unusual volatility

The fall in physical buying in the first quarter represents the lowest quarterly figure for five years, WGC pointed out, adding the fall was caused primarily by the sharp rise and unusual volatility in the gold price which briefly touched record levels above $1,000 an ounce in mid-March.

In particular, jewellery demand declined 21 per cent year-on-year.

The WGC admitted that India, the largest market for gold and also the most price-sensitive, continued to suffer from the impact of high and volatile prices.

Jewellery and investment demand at 71 tonnes and 31 tonnes, respectively were both half the levels of first quarter of 2007.

Gold sales during the recently concluded Akshay Thrithiya helped bolster the numbers to some extent.

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