May 20, 2011
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China, India to boost gold demand this year

May 20, 2011

May 19 - Gold, fresh from striking record highs at the start of this month, will enjoy buoyant demand this year, particularly from China and India, the World Gold Council said in a report on Thursday.

"The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers," said Marcus Grubb, Managing Director of Investment at the WGC.

"High levels of investment demand across the world, strong demand in India and China, the continued strength of the technology sector together with central bank purchasing demonstrates gold's diverse demand drivers.

"We anticipate continued strong demand during the rest of 2011," Grubb said.

Gold spiked to a record $1,577.57 per ounce on May 2, as the safe-haven precious metal was lifted by a weak dollar, low US interest rates and concerns over high inflation.

However, the metal has since tailed off slightly, amid a wider commodities sell-off, and it stood at $1,489.10 in Thursday afternoon deals.

"Prevailing global socio-economic conditions will continue to drive investment demand for gold," the WGC said in its quarterly report.

"These include: continued uncertainty over the US economy and the dollar, ongoing European sovereign debt concerns, global inflationary pressures and continued tensions in the Middle East and North Africa.

"Sustained momentum in Chinese and Indian jewellery demand will underpin growth in the jewellery sector throughout 2011.

"Strong demand in India during the recent Akshaya Tritiya festival and the beginning of the wedding season, alongside extensive purchasing on dips in the gold price, underlines the strength of the Indian market."

At the same time, the WGC predicted that more central banks would buy gold as they seek to diversify reserves into assets that are deemed to be less risky.

The precious metal scored a series of record peaks throughout the first three months of 2011 when the WGC said global demand increased by 11 percent to 981.3 tonnes, compared with 881 tonnes in the first quarter of 2010.

In dollar terms, gold demand soared by almost 40 percent to $43.7 billion in the first quarter, compared with $31.4 billion previously.

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