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Gold demand up 6% in Q3, industry upbeat despite consumer slump

Last updated: 17:31 17 Nov 2011 GMT, First published: 18:31 17 Nov 2011 GMT

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Global economic uncertainty is expected to fuel the current surge in investment demand for gold, even as record prices have hit the jewellery market, the World Gold Council (WGC) said Thursday in a report.

For the quarter that ended September 30, global demand for the yellow metal was 1,054 tonnes, up 6 percent and worth some $57.7 billion in value terms, the London-based WGC said.

The increase was driven by a 33 percent rise in investment demand, with gold offering a safe haven after a US debt downgrade, plunging global equity markets, and an escalating government debt crisis in Europe.

That surge in investment offset a 10 percent drop in jewellery demand during a quarter which saw spot gold prices reach a record $1,920 per ounce in September.

WGC's investment managing director, Marcus Grubb, said: "Given gold's proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating.

"Gold's long-term fundamentals remain strong with a diverse and growing demand base, coupled with constrained supply-side activity."

The gold body said that demand for bullion and coins increased 29 percent to reach 390.5 tonnes in the quarter, up from 303.0 tonnes a year earlier. In value terms, demand for bars and coins in the third quarter equated to $21.4 billion compared to $12.0 billion a year earlier.

Gold exchange-traded funds and similar products witnessed inflows of 77.6 tonnes in the third quarter of 2011, which was 58 percent above year-earlier levels of 49.1 tonnes.

Investment demand for gold in Europe reached a record quarterly value of 4.6 billion euros, equating to 118.1 tonnes - a year-over-year increase of 135 percent.

India is the world's largest gold consumer and importer, and high costs combined with double-digit inflation in the nation, saw demand dropping 23 percent in the third quarter to 203.3 tonnes from 263.9 tonnes a year earlier.

However, rising demand for gold was seen in mainland China, with a 17 percent increase to 200.7 tonnes. Other Asian economies such as Vietnam, Hong Kong and Taiwan also posted strong growth.

Thursday afternoon, gold futures on the NYMEX were down $53.60 to $1,720.70 an ounce.

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