• Grain pain

    Corn crops could break records this year, but for farmers the bounty has a dark side.

  • Node joins TV revolution

    The movie-on-demand business has a new contender, says Arthur Goldstuck.

  • SA market needs Nokia

    A user says the brand should stay as it has great offerings at reasonable prices.

See More

Gold sector upbeat on investor demand

Nov 17 2011 09:19 AFP

Related Articles

Gold drops, hit by market sell-off

Gold up as eurozone debt worries linger

Gold is the new cocaine

Safe as gold

Gold industry awaits breakthrough

Still as good as gold


Mumbai - Global economic uncertainty will fuel the current surge in investment demand for gold, even as record prices force a slump in the jewellery market, the World Gold Council (WGC) said on Thursday.

Global demand for gold was 1 054 tonnes in the three months to September, up 6.0% year-on-year - equal to a record high of $57.7bn in value terms, the WGC said in a report.

The increase was driven by a 33% rise in investment demand, with gold offering a safe haven after a US sovereign debt downgrade, plunging global equity markets and the escalating eurozone crisis.

The investment surge offset a 10% drop in jewellery demand during the quarter as gold prices hit a record $1 920 per ounce in September.

"Investors across the globe sought to protect their wealth, diversify their risk and benefit from gold's strong returns," the WGC said in a report.

"Given gold's proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating," Marcus Grubb, WGC's investment managing director said.

"Gold's long-term fundamentals remain strong with a diverse and growing demand base, coupled with constrained supply-side activity," Grubb added.

The yellow metal, whose key drivers are investment and jewellery, is widely seen as a safe haven for cash in times of uncertain economic conditions and high inflation.

September's record price followed frenzied buying by investors, large funds and central banks around the world.

But the high costs and near double-digit inflation saw demand in India - the world's largest gold consumer and importer - fall 23% to 203.3 tonnes in the quarter to September, from 263.9 tonnes a year earlier.

"Consumer confidence has been knocked by high domestic inflation, of near 10%," WGC analysts Louise Street and Johan Palmberg, said in the report.

"This adversely affected jewellery demand, impacted disposable income levels and overall consumer sentiment."

High and volatile prices during India's festive season, which peaks with the Hindu festival of Diwali in October, deterred customers, they added.

China, where there is rising demand among an ever richer middle class for luxury goods, dominated growth in the quarter, with a 17% increase to 200.7 tonnes. Other Asian economies such as Vietnam, Hong Kong and Taiwan also posted strong growth.

The council expects India's demand for gold to increase during its main wedding season, which runs from December to January.

India's successful monsoon this year is also likely to yield good crops and boost rural income, while easing high food inflation, the report said.

"We look forward to periods of increased price stability which will result in Indian consumers being able to build gold purchases into their household budgets," said Ajay Mitra, WGC's managing director for Middle East and India.

commodities  |  gold


Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

We're talking about:

Small Business

New forms of digital technology are changing the very ways in which entrepreneurs run their businesses.

6 life hacks you simply have to know

A few simple tricks can make your life so much easier!


For chic geeks...

Device lets disabled people talk through their nose
It’s THIS easy for someone to steal your ATM pin!
This is why you should install iOS 8
17 photo illusions that look so real

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...