New York--Gold demand will remain strong in 2010, driven by demand for jewelry in developing nations and investment demand in the United States and Europe, the latest report on gold demand trends shows.

Demand for gold in both India and China was very strong in the first-quarter 2010 as compared to the first-quarter 2009, despite high gold prices, according to the first-quarter 2010 Gold Demand Trends report, released last week by the World Gold Council (WGC) using data compiled by GFMS Ltd.

Per-ounce gold prices averaged $1,109.12 in the first quarter, up 22 percent from $908.41 in the first-quarter 2009.

In India, where gold jewelry accounted for 75 percent of gold demand in 2009 and where gold is considered a hedge against inflation, total consumer demand rose 698 percent in the first-quarter 2010 to 193.5 tons, making it the strongest-performing market for consumer gold demand worldwide. Total consumer demand for gold in China was 139.7 tons in the first-quarter 2010, up 22 percent from 114.7 tons in the first quarter-2009.

While shoppers' desire to buy gold is less strong in the United States and Europe--in both places, consumer demand hovered around 40 tons in the first quarter--ongoing concerns about the economy will continue to drive investment demand there. 

According to the report, the attraction of gold to investors as a liquid, reliable asset that is a stable store of value is high, given the weak economic recovery in the United States and Europe burdened by high and rising public debt levels. In addition, increasing concern over Greece's financial problems and debt contagion fears in the United States and Europe have led to increased buying of gold coins, bars and exchange traded funds (ETFs), which may lead to growth in investment demand in the second quarter. 

Overall, the volume of total identifiable gold demand in the first quarter was 760.2 tons, a 25 percent decline compared to the first-quarter 2009, according to the report. In U.S. dollar terms, the decline was 9 percent. 

Demand growth was strongest in the jewelry sector (up 43 percent) and industrial sector (up 31 percent), while overall identifiable investment demand slid 69 percent relative to an exceptionally strong first-quarter 2009. 

The report notes that if the economy does start picking up in the Western world in the second half of 2010, jewelry demand will recover along with it, fueled in part by pent-up demand for product.  

"If economic recovery does gather pace in Western countries during the second half of 2010, this will enable jewelry demand in Europe and [the United States] to recover, propelled initially by restocking in the jewelry sector as stocks have been run down to very lean levels," the report states

REF: <a href="http://www.nationaljewelernetwork.com/njn/content_display/fashion/jewelry-fashion-reports/e3if0e09b86f3dc219ae84c865051d37551" target="_blank" >Gold demand to hold steady</a>
