Fears of future inflation and ongoing financial uncertainty led investors to continue to flock to gold in the first three months of 2009. Total demand for gold in the first quarter of 2009 went up by 38 per cent (year-on-year) to 1,016 tonnes, a 36 per cent rise in value terms to $29.7 billion.
However, in India, traditionally the world’s largest gold market, demand declined significantly under pressure from record rupee prices and a major deterioration in the domestic economy. Demand fell 83 per cent.
According to figures published by World Gold Council (WGC), investment demand for gold, which includes exchange traded funds (ETFs), bars and coins, was the major source of growth in the quarter, reaching 596 tonnes, up 248 per cent.
A record level of investment was witnessed in ETFs.
Similarly, net retail investment (total bar and coin demand) remained highly robust. Germany was the single biggest bar and coin market in the first three months of the year, while Switzerland came second followed by the U.S.
However, the impact of recession on consumer discretionary spending continued to take its toll on both jewellery and industrial demand. Gold jewellery demand was down 24 per cent from the earlier year levels, with most countries suffering a decline as consumers responded to the high and volatile gold price, which reached record levels in some countries.
According to World Gold Council CEO Aram Shishmanian, “There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define the investment behaviour in the next decade. Gold, as one of the few assets that has held its value during the current economic crisis, has been sought after by investors who are drawn to its proven protective attributes as well as safeguarding themselves from the erosive effects of future inflation”.
Source: hindu.com
