According to the WGC’s Gold Demand Trends report for Q3 2010, published today, demand for gold in the final quarter of 2010 will be driven by the following factors:

* Increasing demand by the world’s two largest markets, India and China, as rising income levels, high savings rates and strong economic growth continue to push up consumption.

* Gold jewellery demand is likely to exceed that of 2009 due to an anticipated recovery in India, the most significant gold jewellery market, and continuing strength in China. While jewellery demand may face challenges ahead, the latest figures show that demand in key markets has shown resilience in the face of higher prices levels.

* Concern over fiscal imbalances and currency tensions will continue to support investment demand for gold. Aside from the recent additional US$600 billion of quantitative easing by the US, the weakening of the US dollar and associated fears of inflation, demand is also likely to be driven by higher gold price expectations, as well as increasing availability and accessibility of gold investment products to retail investors.

* Industrial demand, which has returned to long-term levels, is expected to remain firm on the back of renewed growth in the electronics industry, due to the majority of semi-conductors being wired by gold.

Marcus Grubb, Managing Director, Investment at the WGC commented:

“Healthy gold demand growth in the third quarter occurred in the context of record international prices, demonstrating how consumers, particularly in India and China, are continuing to appreciate the enduring value of gold. The rediscovery of gold’s properties as both a currency and a monetary asset have been brought into sharp focus. Quantitative easing has forced the adjustment of global imbalances into currency markets and the resulting currency conflict is positive for gold. In addition, we believe demand will be facilitated by the growing number of channels that serve to make gold more easily accessible to a greater number of investors.”

Richard Holliday, Director, Industrial at the WGC commented:

“The recovery of industrial gold demand to pre-crisis levels will continue to be sustained by the rise in demand for high-tech goods, such as the iPad and smart phones. Longer-term exciting advancements in the use of gold in nanotechnology, environmental and biomedical applications are also expected to drive demand.”

GLOBAL DEMAND STATISTICS FOR Q3 2010

* Total gold demand was 922 tonnes, an increase of 12% from Q3 2009. In US$ value terms, demand grew 43% to US$36.4 billion over the same period.

* Demand for gold jewellery increased by 8% from Q3 2009, with four of the best performing markets – India, China, Russia and Turkey – accounting for 63% of global demand. In value terms, global demand for the 12 month period ending September 2010 hit a record US$137.5 billion.

* Retail investment rose 25% from Q3 2009 to 243 tonnes. The largest contribution to total demand growth came from bar hoarding, which increased 44% from the previous year. The total value of net retail investments during the quarter was a record $9.6 billion, representing a 60% increase from Q3 2009.

* Total gold ETF demand fell by 7% from Q3 2009 to 39 tonnes. Following a remarkable surge in the previous quarter, which was supported by heightened sovereign risk and currency worries, this quieter period for ETFs reflects consolidation in the market, as it contemplated the prospect of QE2.

* Industrial demand has recovered back to pre-crisis levels of 110 tonnes, reflecting an increase of 13% from Q3 2009. This recovery was driven by improving demand for consumer electronics goods globally, in particular from emerging markets such as China and India, as well as an increased range of new technology products with gold components.

For further information regarding Gold Demand Trends:

* Stephanie Mackrell, Head of Media Relations, World Gold Council, on + 44 (0) 207 826 4763, or stephanie.mackrell@gold.org
* David Schraeder, MSLGroup, on +1.646.221.0108, or david.schraeder@mslgroup.com

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According to the WGC’s Gold Demand Trends report for Q2 2010, published today, demand for gold for the rest of 2010 will be underpinned by the following market forces:

* India and China will continue to provide the main thrust of overall growth in demand, particularly for gold jewellery, for the remainder of 2010.

* Retail investment will continue to be a substantial source of gold demand in Europe.

* Over the longer-term, demand for gold in China is expected to grow considerably. A report recently published by The People’s Bank of China and five other organizations to foster the development of the domestic gold market will add impetus to the growth in gold ownership among Chinese consumers.

* Electronics demand is likely to return to higher historic levels after the sector exhibited further signs of recovery, especially in the US and Japan.

Investors are making the switch from buying gold only in times of crisis to having gold as part of a diversified portfolio, said Jason Toussaint, a managing director for the World Gold Council.

“Gold is the ultimate diversifier,” he said. “Correlation to U.S. equities is zero” in addition to its proven ability to not only hold value in times of crisis but increase.

Marcus Grubb, Managing Director, Investment at the WGC commented:

“Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future. Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly.

Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment.”

DEMAND STATISTICS FOR Q2 2010

* Total gold demand1 in Q2 2010 rose by 36% to 1,050 tonnes, largely reflecting strong gold investment demand compared to the second quarter of 2009. In US$ value terms, demand increased 77% to $40.4 billion.

* Investment demand2 was the strongest performing segment during the second quarter, posting a rise of 118% to 534.4 tonnes compared with 245.4 tonnes in Q2 2009.

* The largest contribution to this rise came from the ETF segment of investment demand, which grew by 414% to 291.3 tonnes, the second highest quarter on record.

* Physical gold bar demand, which largely covers the non-western markets, rose 29% from Q2 2009 to 96.3 tonnes.

* Global jewellery demand remained robust in Q2 2010. In the face of surging price levels, consumption totalled 408.7 tonnes during the second quarter of 2010, just 5% below year-earlier levels.

* Gold jewellery demand in India, the largest jewellery market, was little changed from year-earlier levels, down just 2% at 123.0 tonnes. In local currency terms, this translates to a 20% increase in the value of demand to Rp216 billion.

* China saw demand for gold jewellery increase by 5% to 75.4 tonnes3. While growth in demand in tonnage terms was hindered by extreme weather conditions, the growth in the local currency value measure of demand was 35% to RMB 19.8 billion.

* With the return of demand for consumer electronics, industrial demand grew by 14% to 107.2 tonnes, compared to Q2 2009.  Industrial usage of gold rose mainly thanks to a 24% increase in demand for gold in the electronics sector. Gold is used in a variety of consumer electronics, including smartphones.

Marcus Grubb added:

“While many investors turned to gold as a ‘flight to quality’ in response to the uncertain financial environment, this interest has proved resilient even though a sense of optimism has started to return to some sectors of the investment community. In addition to the ETF market and physical bar and coin market, the demand for gold through internet based investment platforms is likely to provide further sources of investment demand.”

The full 2010 Q2 Gold Demand Trends report, which includes comprehensive data for the second quarter of 2010, can be viewed at: www.mediacentre.gold.org

1 – Total gold demand refers to total identifiable gold demand in the Q2 GDT 2010 report.
2 – Investment demand relates to identifiable investment demand in the Q2 GDT 2010 report.
3 – This figure does not include demand in Hong Kong and Taiwan.

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While China has remained resilient, GID also suggests that jewellery demand in other key markets has continued to recover from a weaker 2009.

The report, which was published today, showed:

• Heightened investor activity supported an upward trend in the gold price throughout the quarter; on several occasions breaking record highs and reaching US$1,261.00/oz on the London PM fix on 28 June, as investors sought out assets offering protection, diversification and liquidity.
• Investors bought 273.8 net tonnes of gold via exchange traded funds (ETFs) in Q2 2010.  This represents the second largest quarterly inflow on record and brought the total amount of gold held in the ETFs that the WGC monitors to over 2,000 tonnes (worth US$81.6 billion). In particular, SPDR Gold Shares (GLD) surpassed the US$50 billion milestone.
• In the early part of the second quarter, many currencies around the globe not only fell against the US dollar but also experienced higher levels of volatility as credit woes in Europe had a negative impact on the outlook for the euro and the British pound. While the dollar appeared to fare better, investors sought out gold as a currency alternative as evidenced by large purchases of coins and small bars around the globe.
• Many assets, including global equities and commodities, experienced a period of pronounced volatility, in some instances surpassing levels seen during the first quarter of 2009.  Gold price volatility, however, remained much lower than many of these assets during the period, meaning gold outperformed versus S&P 500 Total Return Index, the MSCI World ex US Index and S&P Goldman Sachs Commodities Index (S&P GSCI) on a risk-adjusted basis.
• In Q2 2010, the diversity of gold’s demand base, less driven by industrial uses as many other commodities, meant that gold was one of the best performing commodities.  Oil fell by 9.1% and, similarly, metals with a greater degree of exposure to industrial cycles fell substantially: zinc, nickel and lead dropping by more than 20.0% quarter-on-quarter. Even platinum and palladium posted quarterly losses on the order of 6.7% and 7.9%, respectively.

Juan Carlos Artigas, Investment Research Manager, World Gold Council commented:

“During the second quarter, many financial assets, especially in Europe, suffered losses as risk aversion, credit concerns, and disappointing economic news around the world prompted investors to seek assets with little or no default risk, greater liquidity and lower volatility.  As a result, gold was, once again, one of very few assets that exhibited a positive price performance during the period.  However, it is important to note that while gold continued its upward trend during Q2 2010, its price, relative to the price of various assets is not overvalued by historical standards¹ .

“As a result of such wider macro and financial market turbulence, investment demand for gold has unsurprisingly continued to build.  However, what cannot be overlooked during periods of heightened investment activity is that jewellery consumption over the last five years, on average, has accounted for 61% of global gold demand.  Economic development in many emerging markets, and especially China, remains a positive force for the gold market. Moreover, an appreciation of the yuan in a more flexible exchange regime will likely be beneficial to Chinese gold consumers in the long-run. Furthermore, anecdotal evidence suggests that, while jewellery consumption in India and the Middle East has not been immune to higher gold prices and an increase in volatility, these markets are advancing relative to the lower consumption levels experienced in 2009.

“The second quarter marked a negative and highly volatile period for many fiat currencies, not least the euro and the British pound where austerity measures to resolve unhealthy public finances created a gloomy economic outlook.  The dollar seemed to fare better, regaining some ground against emerging market currencies. Given the proven role gold plays as a hedge against weakness in the dollar, it is often assumed that when the US dollar strengthens, the gold price suffers.  This quarter’s data again underlines that a stronger dollar does not automatically translate into weakness in gold’s price trend.”

The full report can be downloaded from: http://www.gold.org/rs_archive/GID_July_2010.pdf

World Gold Council
World Gold Council’s mission is to stimulate and sustain the demand for gold and to create enduring value for its stakeholders. It is funded by the world’s leading gold mining companies.  For further information visit www.gold.org

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The World Gold Council (“WGC”) expects that demand for gold will be strong during 2010, driven by growing demand for jewelery in China and India as well as an increase in European and US investment in the context of continued economic instability, sovereign risk and the threat of a ‘double dip’ recession.

According to WGC’s Gold Demand Trends report, published today, demand in India and China will continue to grow driven by jewelery demand, in spite of high local currency gold prices. In Q1 2010, India was the strongest performing market as total consumer demand surged 698% to 193.5 tonnes. In China, demand proved resilient; demand increased 11% in Q1 2010 to 105.2 tonnes.

This strong demand is despite high local gold prices, which on May 12 in India increased to Rs 56,032/0z, the highest level for the year, while at the same time in China prices reached an all-time high of RMB8,480/oz, suggesting that consumers in India and China are becoming accustomed to higher gold prices.
Concerns over Greece’s public finances and debt contagion fears in Europe have led to strong buying in particular for gold coins, bars and gold exchange traded funds (ETFs) during May which may show up in the Q2 2010 figures. While momentum in ETF tonnage paused during Q1 2010, gold ETF flows started to rise strongly again in April and May as investors sought less volatile investments in which to protect their funds against economic turmoil. On 20 May the GLD SPDR Gold Trust held a record 1,200 tonnes, with a value of US$46.88 billion.

Aram Shishmanian, CEO of the World Gold Council commented:

“Currently, European gold investment demand is exceptionally strong, especially from German and Swiss investors. This is mainly attributable to concern over public debt levels in the Eurozone and the potential inflationary impact of the European Central Bank’s (ECB) announcement of the US$1 trillion rescue package to purchase Eurozone government bonds to address the Greek debt crisis.”

“With the global economic recovery still burdened by high and rising debt levels in Western economies, as well as the renewed threat of recession driving down the US dollar and equities, the outlook for gold as a liquid, reliable asset class and as a store of wealth remains highly favorable.”

According to the WGC, global jewelery demand in non Western countries will continue to recover after reaching 470.7 tonnes in Q1 2010. Economic recovery in Europe and the US will add to this demand, as a potential return to restocking in the jewelery sector is likely, given that existing inventories have been run down since the first half of 2009 to very lean levels. This should provide fundamental support to the gold price.

Aram Shishmanian continued:

“The diversity of demand for gold, both by sector and geography ensures that the outlook for gold remains strong for the remainder of 2010. Despite increasing gold prices, consumers in China and India will continue to drive market growth, particularly in jewelery. In Western markets, the uncertain economic outlook and sovereign risk fears will add further impetus to growth in investment as investors seek to protect wealth. In the instance that we continue to see elevated levels of risk around the world, however, investment demand will remain strong in 2010.”

Whilst total investment demand during Q1 2010 fell in comparison with Q1 2009, this decrease was driven by the very strong level of demand in Q1 2009 for investment particularly ETFs. This exceptional activity created a bias for the total demand figures for Q1 2010 when ETF demand paused. However, the strong recovery in jewellery demand which was driven by China and India in Q1 2010, combined with recent high inflows into ETFs, has created a firm basis for an optimistic outlook for the remainder of 2010.

DEMAND STATISTICS FOR Q1 2010
• While the volume of total identifiable gold demand was down 25% on Q1 2009 levels at 760.2 tonnes, in US$ value terms, the decline was a more moderate 9%.
• Consumers are more comfortable with a higher local price environment, borne out by demand in non-western markets where jewelery demand increased 43%.
• Indian jewelery demand rose 291% to 147.5 tonnes, there was continued strong demand from China and signs of recovery in Turkey and the Middle East.
• Net retail investment demand, which covers retail bar and coin demand, was 26% up on the first quarter of 2009 at 182.5 tonnes.
• Industrial and dental demand was up 31% at 103.2 tonnes, driven by a solid recovery in the electronics and other industrial sectors owing to the improved economic conditions.

The full 2010 Q1 Gold Demand Trends report, which includes comprehensive data for the first quarter 2010, can be viewed at www.gold.org

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However, tonnage demand for gold at 701 tonnes was down 16% on the same period last year and represents the lowest quarterly figure for five years, according to Gold Demand Trends, which is released today by World Gold Council (WGC). This fall was caused primarily by the sharp rise and unusually high volatility in the gold price, which briefly touched record levels above $1,000/oz in mid-March.

The data, compiled independently for WGC by GFMS Ltd, show that the impact of these factors hit home particularly hard in the “physical buying” markets of gold jewellery and coins and bars. Jewellery demand declined 21% year-on-year to 445.4 tonnes, the lowest quarterly level since the early 1990s. Net retail investment demand dropped by 35% to 72.7 tonnes in Q1.

There was a stark contrast in the gold exchange traded fund (ETF) market, however, where a combination of continuing instability in the equities markets, ongoing fears over the dollar and rising inflation, and increased understanding of gold’s investment attributes helped spur demand. Demand for gold ETFs was up 100% on Q1 2007 at 73 tonnes for the quarter – representing $2.2 billion in dollar terms.

Positive news also came from two of the world’s biggest emerging economies with overall demand for gold in China and Russia up 15% and 9% respectively on the same period last year, driven by increasing consumer wealth and ease of access to attractive jewellery and retail investment products.

India, the largest market for gold and also the most price-sensitive, continued to suffer from the impact of high and volatile prices. Jewellery and investment demand, at 71 tonnes and 31 tonnes respectively, were both half the levels of Q1 2007. Against a worsening economic background for consumers in the US market, overall demand for gold fell 15% to 48 tonnes.

Industrial and dental demand declined by 5% on year earlier levels to 110.3 tonnes, primarily in response to the deteriorating US economy, and a slowing in demand for consumer electronics. In value terms, demand was equivalent to $3.2bn, a rise of 35%.

James Burton, CEO of World Gold Council, said:

“The first quarter of 2008 started as the previous year finished with high and volatile prices. This has created tough trading conditions for large parts of the gold market, but I am pleased to see how well gold has fought for, and won, share of consumers’ discretionary spending.

“Early indications are that jewellery demand is likely to remain muted during the second quarter, although there has been positive news from the Indian Akshaya Thritiya festival and the Indian and Middle East wedding seasons, which are expected to generate additional purchasing.

“Investment demand in the first few weeks of the second quarter has been mixed with retail investors in traditional bars and coins encouraged by the pullback in price, while ETFs have witnessed an outflow. However, I am confident that the general investment environment remains positive.”

The supply of gold was 6% higher in Q1 2008 than a year earlier, primarily driven by increased scrap supply which in turn was a reaction to the rising gold price. Mine output remained constrained, little changed from Q1 2007 levels at 593 tonnes, while net official sector (central banks) sales were 8% higher than in Q1 2007. As usual the main sellers were Central Bank Gold Agreement (CBGA) signatories.

Gold Demand Trends figures are compiled independently for World Gold Council by GFMS Limited. The full Q1 2008 report can be viewed at: http://www.research.gold.org/gold_demand_trends/

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