Gold demand up 66% in 2010

Despite high prices, gold demand registered a sharp growth of 66 per cent at 963 tonnes (578 tonnes) in 2010, largely due to pick up in the jewellery sector and lower base in 2009.

The annual jewellery demand at 746 tonnes recorded in 2010 was 13 per cent higher than the previous peak logged in 1998, according to the data released by the World Gold Council (WGC), promoted by the gold mining companies. The annual jewellery demand was up 69 per cent higher when compared with 442 tonnes registered in 2009.

Q4 GLITTERS

The busy wedding and festival season pushed up gold sales during the December quarter. The total gold demand was up 37 per cent at 285 tonnes in the quarter ended December against 208 recorded in the comparable quarter last year. Jewellery demand rose 47 per cent at 210 tonnes (143 tonnes) in the quarter under review. Investment demand rose 60 per cent at 217 tonnes (136 tonnes).

Mr Ajay Mitra, Managing Director, Middle East and India, WGC, said with inflation reaching record numbers and there being extreme volatility in the equity markets, gold was one option that has given investors something to cheer about. “Given the very good returns and consistency of performance, gold should be an integral part of all investment portfolios. Gold should be a well thought out decision for investors given the strengths that the yellow metal enjoys in comparison to other financial instruments,” he added.

Investment opportunity

Consumers have adjusted their expectations with gold prices increasing at regular intervals. Every price dip has provided an investment opportunity as they eagerly watch the next level for the yellow metal.

Beside, fluctuations in prices have reduced to a great extent, reinforcing investments in gold. Gold prices, which increased about 15 per cent compared with last year, was not a deterrent as customers purchased gold instead of deferring them for the future, said a Mumbai-based jeweller.

Following the spike in India, global gold demand surged the highest in 10 years to 3,812 tonnes in 2010 worth about $150 billion (Rs 675,000 crore).

Annual demand for gold jewellery rose 17 per cent to 2060 tonnes from 1,760 tonnes in 2009. However, investment demand in 2010 was down two per cent at 1,333 tonnes compared to 2009 on revival of equity markets in the developing countries.

Demand for gold ETFs and similar products totalled to 338 tonnes in 2010, which was 45 per cent below the 2009 peak of 617 tonnes.

A structural shift by the central bank policy towards gold meant that they became net buyers of gold for the first time in 21 years.

Reasoning the shift in central bank activity Mr. Marcus Grubb, Managing Director, Investment, WGC, said, experiencing rapid growth, emerging market economies have been large buyers of gold to diversify their external reserves. Meanwhile, European central banks have virtually stopped sales in the wake of the financial and European sovereign debt crises, he said.

Mr George Milling-Stanley, Managing Director, Government Affairs at the WGC, said emerging country banks are likely to continue purchasing gold as a means of preserving national wealth and promoting greater financial market stability. Any gold sales from advanced economies are unlikely to be significant as the official sector remains highly risk-averse. Collectively, the official sector is still a significant holder of gold, he added.

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