Indian buyers help drive jump in world gold demand

NEW DELHI, Nov 20, 2008 (AFP) - Gold demand leapt by 18 percent globally in the third quarter, boosted by purchases from India, as investors sought shelter from the global financial meltdown, industry officials said Thursday.

Gold bars at a bank depot - Photo : Jung Yeon-Je/AFP

Worldwide demand rose to 1,133 tonnes in the third quarter to September from 963 tonnes a year earlier while in India, the world's biggest consumer of gold, demand soared by 31 percent to 250 tonnes, the World Gold Council in India said.

"Gold's universal role as a store of value has shone through during this quarter, said Ajay Mitra, managing director of the World Gold Council in India.

"What has played up in consumers' minds is the sudden panic in the financial markets," Mitra told AFP, calling it "an outstanding quarter for demand in India".

In US dollar value terms, global demand for gold rose by 51 percent to a record 31.8 billion dollars from a year earlier, the council said.

Demand for gold surged in India with urban consumers seeking a safe haven investment. Meanwhile a rural economic boom, triggered by a good monsoon rainfall and stronger harvest expectations, created a "feel good" factor which boosted spending on gold during the main Hindu festival season in October, Mitra said.

India's rural area where some 70 percent of the 1.1 billion population lives "is our heartland for demand," Mitra added.

India imports 700 tonnes to 800 tonnes of gold a year on average, representing around 30 percent of global demand.

"We say when Indian gold consumers sneeze and don't buy as much, the rest of the world market catches cold," Mitra said.

So-called "identifiable investment demand," which incorporates demand for gold through exchange-traded funds and bars and coins, was the biggest contributor to global overall demand during the quarter.

It was up to 382 tonnes or 10.7 billion dollars -- double the levels of a year before, according to the council.

"With the very extreme levels of uncertainty, the idea of gold as a safe haven has come back into play," said Rozanna Wozniak, investment research manager at the London-based World Gold Council.

"We saw this particularly in Europe where investment in gold bars and coins went from two million tonnes in the third quarter last year to 51 million tonnes in the third quarter this year," Wozniak, who authored the report, told AFP.

The third quarter saw a record 18 billion dollars worth of consumer demand for gold jewellery with buyers returning to the market as prices softened.

Gold prices have tumbled by nearly 30 percent from a March peak of 1,033 dollars an ounce to 741.50 dollars an ounce.

The biggest contributor to the strong gold trend was India which saw a rise of 65 percent in demand in US dollar terms to a record five billion dollars.

The Middle East, Indonesia and China all showed rises of more than 40 percent in value terms or 10 percent in tonnage.

"Going forward, it's going to take a while for the (economic) uncertainty to settle down and even then, in terms of a more permanent mood, investors will look at risk more seriously," forecast Wozniak.

"What we're going to see is a lot more emphasis on diversification in portfolios. Gold will be important as an insurance policy."by Penny MacRae

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