NEW YORK (The Street) — Investment buying drove gold demand higher in 2009, according to full-year results from the World Gold Council.
In an independent report by GFMS Limited for the World Gold Council, investment demand rose 7% vs. a year ago, making it the only subsector of gold demand to report growth. The advent of ETFs like SPDR Gold Shares iShares Comex Gold Trust and ETFS Gold Trust have made it easier for hedge funds, institutions and average investors to invest in gold. According to the survey, ETF demand was 85% higher than in 2008, which represents an inflow of $17.7 billion. These results starkly contrast to industrial and jewelry demand both down 16% and 20%, respectively with the exception of China, which saw an increase of 30.3 tons in total consumer demand.
Overall identifiable gold demand fell 11% during 2009 as gold prices reached record highs across all currencies, $1,227 an ounce in U.S. dollars. “One of the most important [trends] is the diversity of demand … in dollar terms demand was actually maintained at just over $100 billion for the full year,” says George Milling-Stanley, managing director of the World Gold Council. “Demand was diverse geographically [as well] with China coming along to rival India as the largest consumer in the world.” India demand was down 33% from 712.6 tons to 480 tons, but just fourth-quarter jewelry consumption rose 8% from the previous quarter leading many analysts to believe that demand from India is slowly improving as the global economy stabilizes.
According to Milling-Stanley, 2010 total gold demand will keep improving as long as the world avoids a double-dip recession. He is watching consumption figures from China, India and the U.S. as well as the growth rate of investment demand. The combination of recovering physical demand as well as rising investment demand “would be the ideal paradigm for the gold price.”
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