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Wobbly market drives record Q3 gold demand

November 24, 2008

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London--As Lehman Brothers collapsed and bank fears grew in recent months, investors worldwide seeking safe havens turned to gold, with dollar demand for the metal reaching all-time records in the third quarter of 2008, according to a new report from the World Gold Council (WGC).

"Gold Demand Trends," released last week by the WGC, said dollar demand for gold hit $32 billion in the third quarter, up 45 percent from the second quarter, as investors and jewelry buyers around the globe flocked to plunk down their money on the metal.

WGC CEO James Burton said gold enjoyed both a surge in investment and an increase in consumer demand in the third quarter, a trend he sees continuing amid the ongoing worldwide economic turmoil.

"Looking forward, giving the uncertainty that surrounds the global economy, gold's safe haven appeal should continue, but so too will the possibility of heightened levels of activity in the speculative side of the gold market," he said. "Therefore it is too soon to call an end to market volatility."

Identifiable investment demand, which includes demand for gold through exchange traded funds (ETFs), bars and coins, was the No. 1 reason for the increase in demand, which rose to $10.7 billion, double what it was at the same time last year.

Gold ETFs experienced a record quarterly inflow of 150 tonnes, with peak inflows occurring in late September, triggered by the collapse of Lehman Brothers and general fear of bank failures.

In addition, the figures, compiled independently by GFMS Limited for the WGC, showed retail investment demand rose 121 percent in the third quarter, with strong bar and coin buying in the Swiss, German and U.S. markets.

Europe reached a record-demand level of 51 tonnes of bar and coin buying and France became a net investor in gold for the first time since the 1980s.
On the consumer side, demand reached a record $18 billion, with buyers returning to the market with per-ounce prices hovering at or below $800.

India lead the pack with a 65 percent rise in consumer demand in value terms for gold compared to the previous year, and a 31 percent increase in tonnage.
Demand in China rose 40 percent in value and 18 percent in tonnage and in the Middle East, consumer demand rose 47 percent in value and 15 in tonnage.

Despite lower prices, Western retail markets remain soft, with demand in the United States falling 9 percent in value terms and 29 percent in tonnes, and the United Kingdom down 5 percent in value and 26 percent in tonnes.
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