The two Asian countries will continue to provide the main
thrust of overall growth in demand, particularly for gold jewelry, for the
remainder of the year, according to the World Gold Council's Gold Demand Trends
report for Q2, 2010 released on Wednesday.
The Middle East region had a mixed quarter. "The
Saudi market, one of the Middle East's main markets, performed well in the
second quarter with a five percent rise in gold jewelry demand as the improved
domestic economic conditions boosted consumption," said Ajay Mitra,
managing director, India, Middle East and Turkey at the WGC.
The other Gulf countries underperformed markedly in the
second quarter. In the United Arab Emirates, the Akshaya Trithiya festival
attracted substantial interest, but demand tailed off 15 percent in response to
high and rising prices during the second half of the quarter.
"Pace of gold demand recovery will be gradual
depending on the positive signs of the economic recovery," Mitra said.
Across much of the Middle East region, it appears the
expatriate population reacted most strongly to the higher price level, while in
Saudi Arabia the local population were less price-sensitive and, indeed, seemed
to be buying into the rising price in anticipation of further gains, the WGC
report said.
Mitra, who visited Saudi Arabia recently with WGC Chief
Executive Officer Aram Shishmanian to assess the gold market, said that a
number of jewelers in the Kingdom noticed consumers buy small quantities of
gold more frequently, usually followed by the purchase of a large amount once a
year.
In Egypt, gold demand was down 15 percent. In Turkey,
gold demand dropped 20 percent to 16.2 tons as local prices surged 28 percent
during the quarter, reaching record levels in June, the WGC said.
Mitra said total gold demand in Q2 rose by 36 percent to
1,050 tons, largely reflecting strong gold investment demand compared to the
second quarter of 2009. In value terms, demand increased by 77 percent to $40.4
billion.
Investment demand was the strongest performing segment in
the second quarter, posting a rise of 118 percent to 534.4 tons, compared with
245.4 tons in Q2, 2009.
The largest contribution to this rise came from the ETF
(exchanged traded fund) segment of investment demand, which grew by 414 percent
to 291.3 tons, the second highest quarter on record, he added.
Physical gold bar demand, which largely covers the
non-Western markets, rose 29 percent from Q2, 2009 to 96.3 tons.
The WGC report said global jewelry demand remained robust
in the second quarter. In the face of surging price levels, consumption totaled
408.7 tons, just five percent below year-earlier levels.
Gold jewelry demand in India, the largest jewelry market,
was little changed from year-earlier levels, down just two percent at 123.0
tons. In local currency terms, this translates to a 20 percent increase in the
value of demand to Rs.216 billion.
With the return of demand for consumer electronics,
industrial demand grew by 14 percent to 107.2 tons, compared to Q2, 2009, the
report added.
During the second quarter, the average gold price moved
into higher trading ranges in most currencies. The US dollar gold price surged
to a new high of $1,261 per ounce on June 28 (on the London fix), above May's
record of $1,237.50 per ounce.
On the London Bullion Market, the price of gold was
trading at $1,237.90 per ounce on Wednesday.
The WGC report said supply of gold in the second quarter
reached 1,131.4 tons, a rise of 17 percent from the second quarter of 2009.