Gold Demand Strong as Year of the Golden Pig Begins

The ‘Year of the Golden Pig effect’ strongly affected gold sales in China during the first quarter of 2007 providing a further boost to already robust growth in global demand for gold. Consumer demand for gold in China was up 31 percent on the same quarter last year, as the Chinese flocked to buy gold jewelry and commemorative “lucky balls,” particularly around Chinese New Year in mid-February.

Figures released by the World Gold Council (WGC) show global demand for gold reaching $17.4 billion, more than double the level of four years earlier. The figures, compiled independently for WGC by GFMS Limited, showed identifiable demand for gold in Q1 2007 was 4 percent higher than Q1 2006 in tonnage terms and 22 percent higher in dollar terms.

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, said the WGC, the development provided strong evidence of consumers’ comfort with gold prices above the $650 mark. Total consumer demand reached 211 tons, just six tons short of the previous first quarter peak in 2001, when gold was less than half the price it is now.

Spurred by strong economic growth in key markets and a less volatile gold price, coupled with sustained promotion, jewelry demand was 17 percent higher than the weak Q1 2006 in tonnage terms and 38 percent higher in dollar terms.

In general the outlook for the second quarter is looking very positive with good jewelry demand in most key markets, estimates the WGC. The Council said that 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 very successful.

Overall prospects for investment continue to be positive with a number of underlying political and economic factors well-aligned and an increasing number of gold investment vehicles available.

Gold supply remained tight during the quarter. A fall in scrap supply as consumers became accustomed to current prices and restrained from selling their jewelry, coupled with further dehedging by mining companies, were the main reasons for a 2 percent fall from the already constrained figure for Q1 2006. Net central bank selling was close to year earlier levels, the Council said in a press release.

James Burton, CEO of the World Gold Council, said, “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 jewelry buying, in line with our expectations.

The full Q1 2007 Gold Demand Trends report can be viewed at:

http://www.gold.org/value/stats/statistics/gold_demand/index.html