LONDON (Commodity Online) : India and China will continue to drive gold demand irrespective of its prices, according to World Gold Council.
In its quarterly review report, WGC said Global demand for the second quarter to June was 919.8 tonnes, down 17 per cent year-on-year, from 1,107 tonnes in the same period last year, as the remarkably high European investment seen earlier levelled off.
"The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment," it said.
India and China accounted for 52% of total bar and coin investment and 55% of global jewelry demand.
Year-on-year, total consumer demand growth was 38% in India and 25% in China, compared with a global growth rate of 7%, the industry group said.
Indian jewelry demand climbed to a total of 139.8 tons in the second quarter, up 17% compared with a year earlier, while demand for gold bars and coins there soared 78% to 108.5 tons.
India is the world's biggest importer and consumer of gold. It constituted over a third of global gold demand, while China's share is also expanding rapidly.
Indians bought 540 tonnes of gold in the first-half of 2011, up 21 per cent from the same period last year.
Gold jumped to a record $1,814.95 per ounce this week after global equities markets slumped and investors were spooked after the US sovereign debt downgrade and growing concerns about the Eurozone crisis.
In China, demand for jewelry was up 16% at 102.9 tons, while coin and bar purchases rose 44% on-year, to 53 tons.
Turkey, however, was the strongest growth market in percentage terms for bars and coins in the second quarter, with demand there rising 90% to 13.6 tons. Jewelry demand growth was strongest in Hong Kong, where purchases climbed 38% to 6.8 tons.
Gold buying, particularly in China, should also be supported by improved access to the market, with banks actively promoting gold investment products.
While the longer term outlook appears favorable as disposable income rises across India and China, it is "likely to be a bumpy transition as growing wealth and urbanisation may erode traditions," the WGC said.
WGC said demand for gold was still healthy, particularly for jewellery, despite the decline in demand, which steadied after the heavy investment in the last 12 months in gold exchange traded funds.
The 2011 June-end quarter was the second-highest quarterly value ever at $44.5 billion and the highest-ever quarterly demand for gold was valued at $44.7 billion in the three months ended last December.
