Global Biz

Gold outlook positive for 2011 on strong demand

(Xinhua)
Updated: 2011-05-19 22:56

BEIJING - The global outlook for gold demand remains robust throughout 2011 against the background of another strong quarter, geographic and sectoral diversity of demand, and strong fundamentals, the World Gold Council (WGC) said Thursday.

In a report about gold demand trends in the first quarter this year issued on its website, the WGC said factors such as continued uncertainty over the US economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and tensions in the Middle East and North Africa will continue to drive investment demand for gold.

The WGC predicts that sustained momentum in the demand for Chinese and Indian jewelry will also support growth in the jewelry sector throughout 2011.

The WGC expects net purchasing by central banks to continue in 2011 as central banks turn to gold as a means of diversifying reserves.

"The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers," said Marcus Grubb, managing director of investment at the WGC.

Gold has fallen below $1,500 an ounce since May amid great volatility. Gold closed at $1,490.00-$1,491.00 per ounce Thursday in Asian markets, down from $1,493.00-$1,494.00 on Wednesday.

Grubb said gold has diverse demand drivers, including high levels of investment demand across the world, strong demand in India and China, the continued strength of the technology sector and central bank purchasing.

"We anticipate continued strong demand (for gold) during the rest of 2011," he added.

According to Albert Cheng, managing director of WGC's Far East Branch,China's appetite for gold has increased rapidly over the past few years.

Cheng said that increasing prosperity in China coupled with people's high affinity for gold will drive long-term demand while short-term inflationary expectations are likely to support the country's case for investing in gold.

According to the WGC's data, global gold demand in the first quarter of 2011 totalled 981.3 tonnes, up 11 percent year-on-year. In value terms, this translates to $43.7 billion, compared to $31.4 billion in the first quarter of 2010, an increase of almost 40 percent.

From January to March, the quarterly average gold price hit a new record of $1,386.27 an ounce, as investment demand grew by 26 percent year-on-year to 310.5 tonnes.

During the first quarter, the gold supply declined by 4 percent year-on-year to 872.2 tonnes due to a sharp increase in net purchasing by central banks and a fall in the supply of recycled gold, down 6 percent from a year earlier to 347.5 tonnes.

Mine production increased by 44 tonnes year-on-year, or 7 percent, with negligible net producer de-hedging.

Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total net purchases during the first three quarters of 2010, according to WGC.