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Thursday, May 19, 2011

Global Gold Jewelry Demand Strong in Asia while Weak in U.S., Europe and Middle East

Gold Jewelry demand increased 7 percent, year-over-year, to 556.9 tons in the first quarter of 2011, which translates to a record value of $24.8 billion, the World Gold Council said Thursday. India and China, the two largest markets for gold jewelry, together accounted for 349.1 tons or 63 percent of the total, $16 billion by value.

In the U.S., gold jewelry demand declined 10 percent to 20.5 tons, according to the WGC’s Gold Demand Trends report.

Demand for gold jewelry also fell in other parts of the world. In Europe, demand declined 11 percent to 4.7 tons and in the Middle East it dropped 39 percent to 10.9 tons.

India alone accounted for 37 percent of global jewelry demand. Demand increased 12 percent to 205.2 tons, translating to a 38 percent increase in value, according to the report. Demand in China increased 21 percent, year-over-year, to 142.9 tons ($6.4 billion). In percentage terms, Hong Kong was the largest growth market for gold jewelry, with demand up 32 percent to 7.3 tons.

“The regional breakdown of jewelry demand shows a story of two halves: strength in India and much of the east Asian region contrasting with broad weakness in the western and Middle Eastern markets,” WGC said in its report.

Jewelry demand accounted for 57 percent of all gold demand during the first quarter, according to the report.
(2010 Gold Statistics and 2011 Outlook after jump) 

Gold Demand Statistics for Q1 2011
• Global gold demand, which includes its use as an investment vehicle and in the technology sector, increased 11 percent in the first quarter of 2011 to 981.3 tons. In value terms, this translated to a 40 percent increase to $43.7 billion, compared with $31.4bn in the first quarter of 2010, an increase of almost 40%. This was largely attributable to a widespread rise in demand for bars and coins, supported by an improvement in jewelry demand in India and China.

• The quarterly average gold price hit a new record of $1,386.27 an ounce (London PM Fix), its eighth consecutive year-on-year increase.

• During the first quarter of the year, investment demand grew by 26 percent to 310.5 tons. In value terms, investment demand was $13.8bn.

• ETFs and similar products witnessed net outflows of 56 tons ($2.5bn). The collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tons equating to more than $95 billion.

• Technology demand remained steady in the first quarter at 113.8 tons ($5.1bn).

• The gold supply declined in the first quarter by 4 percent, year-over-year, to 872.2 tons 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 percent to 347.5 tons. Mine production increased by 44 tons (7 percent) year-over-year.

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

2011 Outlook
Global gold demand should remain robust for 2011, WGC said, driven by a number of key factors, including:

• Global socio-economic conditions that will continue to drive investment demand for gold, including uncertainty over the U.S. economy and the dollar, European sovereign debt concerns, global inflationary pressures and tensions in the Middle East and North Africa.

• Sustained momentum in Chinese and Indian jewelry demand.

• The continued purchasing of gold by central banks as a means of diversifying their reserves into an asset with no credit or counterparty risk.

“The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers,” said Marcus Grubb, World Gold Council managing director, Investment. “High levels of investment demand across the world, strong demand in India and China, the continued strength of the technology sector together with central bank purchasing demonstrates gold’s diverse demand drivers. We anticipate continued strong demand during the rest of 2011.”