- India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.
- Retail investment will continue to be a substantial source of gold demand in Europe.
Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People's Bank of China and five other organisations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.
Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.
Marcus Grubb, Managing Director, Investment at the WGC commented:
"Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.
"Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment."
Ajay Mitra, Managing Director, India, Middle East and Turkey at the WGC commented:
"While demand in the Middle East was mixed for the second quarter, we have witnessed growth in gold jewellery demand in Saudi Arabia, where the local population appears to be buying in anticipation of further price increases. In addition, we witnessed an increase in demand in the UAE around Akshaya Tritiya."
Demand in Egypt was 15% down on year-earlier levels as the higher gold price took its toll. However, on a half-year basis, demand for the first half of 2010 was 2% above H1 2009, as tourist numbers recovered during the first six months of the year.
GLOBAL DEMAND STATISTICS FOR Q2 2010
- Total gold demand in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion.
- Investment demand was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.
- The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on record.
- Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.
- Global jewellery demand remained robust in Q2 2010. In the face of surging price levels, consumption totalled 408.7 tonnes during the second quarter of 2010, just 5% below year-earlier levels.
- Gold jewellery demand in India, the largest jewellery market, was little changed from year-earlier levels, down just 2% at 123.0 tonnes. In local currency terms, this translates to a 20% increase in the value of demand to Rp216 billion.
- China saw demand for gold jewellery increase by 5% to 75.4 tonnes. While growth in demand in tonnage terms was hindered by extreme weather conditions, the growth in the local currency value measure of demand was 35% to RMB 19.8 billion.
- With the return of demand for consumer electronics, industrial demand grew by 14% to 107.2 tonnes, compared to Q2 2009.
Marcus Grubb added:
"While many investors turned to gold as a 'flight to quality' in response to the uncertain financial environment, this interest has proved resilient even though a sense of optimism has started to return to some sectors of the investment community. In addition to the ETF market and physical bar and coin market, the demand for gold through internet based investment platforms is likely to provide further sources of investment demand."