Blogs & Comment

ETFs fuel gold demand in Q1

The World Gold Council today released its Gold Demand Trendsreport for the first quarter of 2009. The WGC, for those who dont know, is based in London and sources its research from GFMS Ltd. for this report.

It was no real surprise to find that gold demand dropped in the first quarter for both jewelry (down 24% from Q1/08, with China and Hong Kong being the only two regions to show an increase) and industrial uses (down 31% from Q1/08, with electronic uses contributing most to the decline). However, gold demand for investment purposes soared 248% to 595.9 tonnes compared to Q1/08. The main contributor to this increase was ETFs, which added 465.1 tonnes, a jump of 540%, compared to one year earlier. The demand for gold bars and coins also continued to be strong this quarter, up 130.8 tonnes, a jump of 33%, compared to Q1/08.

Overall, the WGC found that gold demand this quarter reached US$29.7 billion, a jump of 36%, and gold averaged US$908/oz, a slight drop of 2% compared to Q1/08. Meanwhile, gold supply was up 34% thanks to recycled scrap gold.

The WGC believes demand for jewelry and industrial will continue to struggle. Meanwhile, it anticipates investment demand will rise. Should the economy recover, the WGC anticipates that inflation concerns will continue to ignite gold demand. The WGC also predicts that uncertainty of gold supply will be fuelled by recycled scrap.