WGC Reports 22% fall in Jewelry Demand

Investors drove the gold price to new 26-year highs in the first quarter of 2006 with 109 tonnes flowing into Exchange Traded Funds (ETFs) and similar products, according to the World Gold Council (WGC.) Gold has also become attractive to longer-term investors, such as pension funds eager to diversify. According to figures compiled by GFMS Ltd for the World Gold Council, total demand for gold at 835 tonnes, was 16% lower than first quarter 2005, primarily as a result of a significant fall in jewelry demand. However, this was equivalent to substantial 9% increase in spending on gold in dollar terms, the WGC reported. "Similarly, while jewelry demand fell 22 % in tonnage terms --when compared with an exceptional first quarter in 2005-- it reached $9.5 billion in dollar terms in the first quarter, a rise of 2%," reported the WGC.

James Burton, CEO of the WGC, said, "It is gratifying that despite significant price volatility in

the quarter,

in almost all categories, buyers are spending more on gold than they were a year ago. Particularly pleasing is the increasing interest from institutional investors with strong evidence that much of the demand is coming from new long-term investors who are rediscovering the lasting diversification attributes of holding gold within a portfolio. "In jewelry markets as a whole, even though buyers in many countries tend to be susceptible to price volatility, consumers are continuing to spend more money on gold, even if they no longer get as much of it. This reinforces the positive attitude and buying intentions of consumers in these markets, and proves that despite price increases, gold jewelry demand remains robust.�

Gold jewelry buyers around the world held back from purchasing in the first quarter of 2006. Markets in Asia and the Middle East, which account for nearly two thirds of global gold jewelry demand, are also those that are most sensitive to gold price volatility, reported WGC. First quarter 2006 results are broadly comparable to jewelry demand levels reported in the first quarter of 2003 and 2004 when the gold price was $352 and $408 respectively, reported WGC. This underscores the manner in which demand has steadily overcome the impact of rising prices. However, sustaining the current level of effective marketing guidance is the key to maintaining robust demand the group suggested.