India earns high investments in gold during Q3, reports WGC

The World Gold Council has published its report on Gold Demand Trends for 2007, concluding that the overall demand for gold as investment and jewellery surged during 2007, although the fourth quarter was hard hit by exceptionally high rise in prices. During the year the identifiable gold demand was 4% higher in 2007 than in 2006, which along with the rise in gold price surpassing the previous $850 oz record, made up for the US $79bn dollar demand for gold in 2007. The demand overall grew to 3,547 tonnes. Of this India’s share was 773.6 tonnes (an increase in tonnage of 7% from 2006), and in this jewellery demand amounted to 558.2 tonnes, a rise of 6% on 2006 levels.

India’s robust economy and buoyant stock market at that time, prompted purchase during the first 8-9 months inspite gold price exceeded Rs. 9,000/10g in September. During Diwali, the season for gold purchase, demand for gold bars and coins was above that for gold jewellery. Investment demand returns were around 16% in Rupee terms. Annual investment demand in India doubled in 2007, since 2004. Net retail investment rose by 10% to 215.4 tonnes. In Q4 however, as the gold price touched over Rs. 10,000/10g, gold tonnage demand dipped 64% on year earlier levels following 40% growth in the first three quarters. Identifiable demand in Q4 fell by 17% in tonnage terms from year-earlier levels.

China became the second largest volume retail market for gold jewellery overthrowing US with a total consumer demand of 326 tonnes, 26% higher, and jewellery demand reached 302 tonnes.In the US, jewellery demand stood 14% down on 2006 figures. In Turkey, jewellery demand was at 188 tonnes, the second highest annual figure ever, up 14% on 2006. Russia reported a 11% increase in jewellery demand, while in Q4 it was 25% making Russia the fastest growing country for Q4. “Jewellery and retail investment demand is unlikely to be strong in the first quarter of 2008, however gold’s desirability to consumers and investors alike remains very strong and once prices stabilise we believe buyers will come back to the market”, James Burton, CEO of the World Gold Council, said.

Gold supply was tight throughout 2007, 3% lower in tonnage. Supply from the official sector rose due to higher Central Bank Gold Agreement sales, but this was offset by increased de-hedging by gold mining companies and lower scrap supplies. In the US, Q4 2007 inflows were at US$8 billion, the highest quarterly level in recent years. Buying occurred in “inferred investment” category, net retail investment, like bars and coins went up 2% year-on-year in 2007, but feel in Q4 by 39% lower at 67 tonnes and demand fell to 78 tonnes in Q4. “Investment demand is likely to remain robust in the early part of 2008 as long as the current financial and economic worries and dollar weakness continue. A growing awareness among investors of the long-term benefits that a small strategic allocation can bring to a balanced portfolio should also contribute to rising investment demand.” Burton said.