Commodity Online
LONDON: The global economic meltdown has propelled a surge in demand for gold jewellery, bars and coins that the demand for the yellow metal has risen to touch 3,659 tons, says a new report from the World Gold Council (WGC).

The Gold Demand Trends, compiled for WGC by GFMS Limited said that
investment demand for gold, including gold exchange traded funds (ETFs), bars and coins, was 64% higher in 2008 than in 2007.

”This is equivalent to an additional inflow of $US15 billion. Demand for gold bars and gold coins rose 87% over the year with shortages reported across many parts of the globe,” said the WGC report.

It said jewelry demand was up 11% in dollar terms at almost $US60bn for the whole year, but down 11% in tonnage terms at 2,138 tonnes.

Here are the key points in the report:

**Total demand remained very strong in the fourth quarter of 2008, up 26% on the same period last year at 1036 tonnes or $26.5bn in value terms. The biggest source of growth in demand for gold in Q4 was investment.

**Identifiable investment demand reached 399 tonnes, up from 141 tonnes in Q4 2007, a rise of 182%. The main source of this increase was net retail investment, which rose 396% from 61 tonnes in Q4 2007 to 304 tonnes in Q4 2008. The most dramatic surge was in Europe, where bar and coin demand increased from just 9 tonnes in Q4 2007 to 114 tonnes in Q4 2008, a 1,170% increase. ETF holdings broke new records during the quarter. Although the net quarterly inflow was down from the level of the previous quarter, the growth rate on Q4 2007 was a strong 18%.

**Total demand in India, the world’s largest gold market, in the fourth quarter was up 84% in tonnage terms, led by a very strong 107% rise in jewelry demand, underpinned by investment attributes of gold. This phenomenon has to be set against a very weak Q4 2007, however. Total gold demand in Greater China in Q4 was resilient to the global turmoil. Total off-take was up 21% on the same period last year, with investment the main contributor to growth but jewelry demand also holding up well.

**Investment demand in Thailand soared during the quarter, from a net outflow of 8 tonnes in Q4 2007 to a net inflow of 21 tonnes in Q4 2008. As with many other parts of the region, this turnaround was underpinned by safe haven buying. Demand in the Middle East in Q4 2008 was up 1% on year earlier levels, with the strong growth in the bar and coin market (up 139%) offset by 7% decline in jewelry demand, which makes up 90% of the market in this region.

**A combination of gold price volatility, a sharp fall in the local currency, and exchange rate uncertainty led to a 59% fall in overall gold demand in Turkey in the fourth quarter.

**In the United States, the deteriorating economic conditions produced a mix result for gold demand. Fourth quarter jewelry demand was down 35% as consumer spending plummeted. In stark contrast demand for gold bars and coins rocketed by 370% in Q4, representing 35 tonnes of gold.

**Gold supply in Q4 was up 5% relative to year-earlier levels and year-on-year, declined 1%. Slightly lower mine production, higher levels of scrap and lower levels of gold producer de-hedging, were partly offset by lower net central bank sales in Q4 2008, which totaled 71 tonnes, down from 97 tonnes in Q4 2007.