Gold demand doubles; supply tightPRECIOUS METALS
Gold demand doubles; supply tight
Global demand for gold reached $17.4-billion in the first quarter of 2007 — more than double the level of four years earlier, figures compiled independently for the World Gold Council by GFMS show.
The figures show identifiable demand for gold in quarter one of 2007 was four percent higher than quarter one in 2006 in tonnage terms and 22 percent higher in dollar terms.
The 'Year of the Golden Pig effect' impacted strongly in China in the first quarter of 2007 providing a further boost to already robust growth in global demand for gold, the WGC said.
'Lucky' gold balls
Consumer demand for gold in China was up 31 percent on the same quarter last year, as the Chinese flocked to buy gold jewellery and commemorative "lucky balls", particularly around Chinese New Year in mid-February.
Demand in the world's largest gold market, India, also surged in the first quarter, rising by 50 percent on Q1 2006 figures. Strong economic growth and the onset of the wedding season played a role, but, more importantly, the development provided strong evidence of consumers' comfort with gold prices above the $650 mark.
Total consumer demand reached 211 tonnes, just six tonnes short of the previous first quarter peak in 2001, when gold was less than half the price it is now, the WGC noted.
Jewellery demand up
Spurred by strong economic growth in key markets and a less volatile gold price, coupled with sustained promotion, jewellery demand was 17 percent higher than the weak Q1 2006 in tonnage terms and 38 percent higher in dollar terms.
Net retail investment was 28 percent higher than Q1 2006 in tonnage terms and 51 percent higher in dollar terms. However slower growth of exchange traded funds, compared to Q1 2006, resulted in total identifiable investment falling 26 percent in tonnage terms and 13 percent in dollar terms.
Industrial demand was up slightly on Q1 2006, one percent higher in tonnage terms and 18 percent up in dollar terms.
Indian festival
"In general the outlook for Q2 is looking very positive with good jewellery demand in most key markets," the WGC added.
The Akshaya Thritiya festival, originally considered an auspicious day for starting new ventures, investing or buying in Southern India, but now promoted by WGC as a nationwide gold-buying occasion, was highly successful.
Gold supply remained tight during the quarter. A fall in scrap supply as consumers became accustomed to current prices and restrained from selling their jewellery, coupled with further de-hedging by mining companies, were the main reasons for a two percent fall from the already constrained figure for Q1 2006. Net central bank selling was close to year earlier levels, it said.
Gold nanotechnology
"This has been a very encouraging quarter. After a 2006 dominated by price volatility, the more stable start to 2007 has clearly encouraged more active jewellery buying, in line with our expectations," said WGC CEO James Burton.
"The recent announcement regarding the development of a new gold nanotechnology product, predicted to reduce noxious emissions by as much as 40 percent more than existing pure-platinum catalysts at equal cost, is very exciting. With the diesel automobile market continuing to grow strongly across the globe, we will watch this new technology's development with great interest," he added.