India’s appetite for gold continued strong despite high prices in the third quarter of 2009. According to ‘Gold demand trend’, a report released by the World Gold Council (WGC), the third quarter demand for gold in India improved by 26 per cent over the previous quarter.
However, absolute levels of demand remained weak as high rupee prices and a poor monsoon impacted consumer spending and confidence. The exceptionally strong third quarter in 2008 saw gold demand halve in the third quarter in 2009, jewellery demand was down 42 per cent at 111.6 tonnes and net retail investment demand of 26 tonnes was two thirds lower.
Aram Shishmanian, CEO, WGC, said, “consumer and retail demand in India has been impacted by the high local price levels witnessed in this quarter. While consumers are still adjusting to a new, higher pricing environment, there is still widespread awareness about gold’s role as a store of value and as a result, we are seeing less distressed selling as consumers look to preserve their wealth in the face of ongoing economic uncertainty.”
Globally, total identifiable gold demand for the third quarter of 2009 reached 800.3 tonnes, or $24.7 billion, up 15 per cent from the second quarter. Jewellery and investment demand in non-western markets rebounded from the low levels seen in the first quarter, while industrial demand started to recover in response to improving economic conditions.
There was, however, a 34 per cent drop over the year ago levels due to exceptionally strong third quarter in 2008, which had seen soaring demand in response to the deepening global financial crisis and as many non-western markets responded to a dip in the gold price in that quarter.
Early signs of an economic recovery and improving consumer confidence have seen jewellery and industrial demand rise relative to last quarter, and the profit taking witnessed earlier in the year had markedly decreased, said Mr. Shishmanian.
“The outlook for investment is positive overall with absolute levels of demand likely to remain well supported by continued economic and currency uncertainty, inflation concerns and the search for diversification. In the official sector, we expect to see a continuing trend of central banks diversifying their dollar exposure in favour of the proven store of value represented by gold.”
WGC figures show that average gold prices for the third quarter this year were higher by 10 per cent at $960 an ounce over the year-ago period.
This rise was even stronger in a number of local currencies. Although jewellery demand was up 17 per cent over the second quarter in 2009, due in part of seasonal factors, high domestic pricing environment resulted in a 30 per cent drop in jewellery demand over the third quarter of 2008. Total supply of gold contracted to 833 tonnes, 8 per cent below the second quarter and 5 per cent below the year-ago levels.