Gold demand, which dropped in the second quarter of this year, is expected to strengthen by the end of 2011, driven by robust jewelry consumption in India and China and recovery in investment demand, a senior World Gold Council (WGC) officials said Friday. Overall gold demand fell 17 percent year-on-year in the three months from April to June to 919.8 tons as a sharp drop in investment demand offset a tentative recovery in jewelry buying, the gold mining industry-funded WGC said in August. Gold for December delivery added $2, or 0.1 percent, to settle at $1,859.50 an ounce Friday on the Comex division of the New York Mercantile Exchange. World's top gold consumer India along with China, US and Saudi Arabia accounted for nearly half of world's gold demand, WGC said. Jewelry segment continued to drive gold demand as buyers from these four countries accounted for 46 percent of the total buying across the globe. India, in particular with its mushrooming economy, up-coming festivals and better-than-expected harvest is expected to further strengthen sales, WGC added. WGC said at the end of the second quarter this year, global gold demand stood at 919.8 tons, down by 17 percent year-on-year while in value terms, Gold demand surged five percent to reach $44.5 billion. Demand for gold-backed ETFs has also increased in the past few years as world equity markets collapse and the European debt crisis creates ripples across countries, experiencing a 152 percent zoom in 2008. In the third quarter, demand appears to have started to start recover with increasing concerns about weakness of major global economies prompting investors to buy gold as safe haven while Asian consumers continued to splash out on jewelry, WGC Managing Director for Investment Marcus Grubb said. "In the third quarter, we are going to see strong investment numbers, because of the European crisis, the debt downgrade in the United States and poor economic figures coming from the United States which have created a concern in investors' mind that we may be heading back to another recession," he noted. "It sends liquidity into gold," he added.David Lamb, WGC managing director for jewelry, said economic gloom will hit gold jewelry appetites in western markets, but jewelry buying in India and China – which together account for 55 percent of global jewelry demand - remains very strong. "If you add that up, because of the biggest and most dynamic move (in gold jewelry demand) eastwards, we think this year will show an overall positive trend," Lamb said. Physical demand for bars and coins rose by 42 percent in second quarter this year over the same period last year. Demand for technological uses of the metal remained more or less unaffected. Mine production was the only positive contributor to the gold supply, increasing by a modest seven percent in second quarter this year, WGC added.
