According to The World Gold Council (WGC), jewellery and investment demand looked positive during the first half of the year. At the same time the council has cautioned that excessive price volatility could hinder future jewellery sales.

WGC said that gold demand in 2006 rose to record levels in dollar terms, but actually fell in tonnage terms, partly due to a drop in mine production and lacklustre jewellery demand, primarily in the first half of last year.

James Burton, the WGC Chief Executive Officer said, “We must recognise that although we have seen a steep rise in the dollar value of gold demand, there was also a decline in tonnage demand as extreme price volatility impacted consumers' jewellery purchases.”

He added that he was particularly pleased by continued growth in industrial demand for gold.