Gold Demand Tops US$100 Billion; Mine Supply Under Threat - WGC


". . .World Gold Council records that dollar demand for gold in 2008 reached US$102 billion, 29% up on 2007."

The latest Gold Demand Trends publication from the World Gold Council records that dollar demand for gold in 2008 reached US$102 billion, 29% up on 2007. The reawakening of investor interest in gold in 2008 means that demand for bars and coins rose by 87% over 2008, with shortages reported in many areas.

Jewelry demand increased by 11% in dollar terms to almost US$60 bn, although tonnage was down by 11% to 2,318 tonnes as jewelry buying was hard hit in the key markets by the high and volatile gold prices. Underlying demand, however, remains resilient with bursts of strong bargain-hunting buying when prices dip.

The Council avers that the extreme uncertainty surrounding the global economy should continue to underpin investment demand, especially that for bars and coins. This is expected partly to be offset by continued weakness in both industrial and jewellery demand.

On the supply side the Council comments that the constraints surrounding mine output are unlikely to ease, and actually have the potential to worsen as credit conditions continue to cause problems for some miners and explorers, although continued elevated prices may keep scrap levels high.

This snapshot should demonstrate how very important the investment sector has been, and remains, to the gold price. In the current environment this investment activity is likely to be sustained and the outlook of the gold price therefore remains reasonably strong. The physical market, though, is currently likely to support the price in times of weakness, but is not of itself enough to drive prices higher.

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