Total demand for gold rose in the second quarter of 2006 to half-year and quarterly highs despite significant price volatility. Investment demand increased on the back of sustained interest in gold-backed exchange traded funds and related products, as well as supportive economic and geopolitical conditions, while changes in consumer attitudes combined with rising disposable incomes in key markets saw consumers spend more on gold jewellery than ever before – an amount marginally higher than the previous record set in Q4 2003.
Identifiable investment demand for gold in Q2 2006 surged 19% in tonnage terms compared with the same period last year to 130 t, driving the total value of investment demand for gold in the first half of 2006 up 40% to $6.1 billion, according to figures compiled by GFMS for the World Gold Council.
Gold jewellery demand rose 12% in value terms to $11.4 billion for the quarter. Many consumers, manufacturers and retailers remained sensitive to price volatility, showing a reluctance to commit to purchasing that resulted in a 24% fall year on year in tonnage terms to 562 t. This drop in gold jewellery demand in volume terms affected overall demand for gold, which was down 16% to 802 t on the same period in 2005. The average price of gold for the quarter was up by 47% year on year.
James Burton, Chief Executive of the World Gold Council, commented “Price volatility has, as expected, had a detrimental effect on demand in tonnage terms. However it is reassuring to see people are spending more on gold. Sentiment towards gold has remained strong, and today’s figures indicate continued investor interest and a record high in dollar terms for gold jewellery purchasing.
“Earlier this month, the World Gold Council published research revealing substantial growth in the potential market for gold jewellery. This quarterly all-time record for gold jewellery demand in dollar terms goes a long way toward reinforcing the findings of this research and further supports the positive work of the World Gold Council in marketing gold jewellery to target markets around the world.
“I am further encouraged by strong results in investment demand for gold. The sustained investor interest in gold-backed exchanged traded funds was particularly satisfying, with streetTRACKS gold shares, the World Gold Council product listed on the New York Stock Exchange, accounting for the majority of growth.”