Mumbai: Despite the pressure on jewellery purchases because of high gold prices and the global economic downturn, demand for gold remained robust in Q2 09, the World Gold Council (WGC) said here.
"Investment demand for gold remained very strong in the second quarter of 2009, rising 46 per cent on year-earlier levels as investors continued a flight to quality. Overall demand for gold fell back from recent high levels as weak economic conditions and high gold prices combined to impact demand," according to the Q2 09 Gold Demand Trends report published today by the World Gold Council (WGC).
Although gold demand remains very high on a historical basis, total demand in Q2 09 was down 9 percent on the levels of a year-earlier, a 6 percent decline in dollar value terms to USD 21.3-billion.
In India, despite domestic economic pressures and sustained near record local gold prices, second quarter gold demand recovered from the exceptionally weak levels witnessed in the previous quarter, rising from 17.7-tonnes in Q1 09 to 109-tonnes in Q2 09. However, total demand remained well below year-earlier levels. Total gold off-take was down 38 percent on Q2 08, with jewellery, the largest component of demand, falling 31 percent, WGC said.
Retail investment demand returned to positive levels from the dishoarding seen during the first quarter, but was nevertheless weak in comparison to year-earlier totals.
Demand for bars and coins, at 21 tonnes, was less than half the 48.1 tonnes recorded in Q2 08.
Despite the recent near-record rupee prices, investor appetite and consumer affinity for gold remains healthy. While the most recent quarter-on quarter improvement was in large part a seasonal improvement, we expect a healthy rebound in activity. A stronger economic outlook than many regions, and the forthcoming festival season suggest that demand for gold will continue to build on recent trends," World Gold Council`s CEO, Aram Shishmanian, said.
"We expect consumers, investors and the trade to look for opportunities to buy following an exceptional period of profit-taking and de-stocking," Shishmanian said.
Although demand failed to match the exceptional levels seen in previous quarters, demand nevertheless remained very robust throughout the quarter.
Investment demand, in particular, witnessed a strong quarter and this indicates a growing recognition of gold as an important and independent asset class, he said.
The global economic downturn has certainly had a major impact on the purchasing power of gold consumers, as have the high local prices and dollar volatility. However, we continue to see pockets of solid demand in many non-western markets on dips in the gold price," Shishmanian said.
WGC expects consumers, particularly in India, to look for opportunities to buy back the jewellery that has been re-cycled over recent quarters.
The figures, compiled independently for WGC by GFMS Limited, show that total global identifiable investment demand for gold, which includes exchange traded funds (ETFs) and bars and coins, remained very strong.
Investment demand rose to 222 tonnes, a 46 percent increase on year-earlier levels, but below the extreme highs experienced during the previous three-quarters when the economic and financial crisis was at its peak.
The impact of high local gold prices (near record highs for consumers in some countries), at a time of severe global economic difficulty, led to a widespread decline in consumer demand for gold jewellery, down 22 percent compared to the same period in 2008.
Gold demand in Greater China in Q2 was up 9 percent on the levels of Q2 2008, equivalent to a 12 percent rise in dollar value terms.
Total demand for gold in the Middle-East fell by 18 percent in Q2 09 to 72 tonnes.
In the US, total gold off-take in Q2 09 was 10 percent above the levels of Q2 08, equivalent to a rise of 13 percent in dollar value terms, driven by retail investment demand which rose by 91 percent.