After the Great Gold Rush, the Sell-Off Gathers Pace
Jun 02, 2004 (Evening Standard - Knight Ridder/Tribune Business News via
COMTEX) -- Gold was in big demand during the first three months of this year,
despite a sharp increase in its price triggered by the sliding dollar.
Figures today from the World Gold Council show consumer demand for the yellow
metal -- including jewelry and retail investment -- was up by 12 percent in
tonnage terms on a year earlier and 30 percent in dollar terms.
The gold price during the quarter averaged $408 an ounce compared with $352 in
the same quarter last year.
In India, already the world's biggest gold-consuming nation, demand increased by
21 percent, boosted by a strong economy and rural customers benefiting from the
after-effects of 2003's good monsoon rains.
Jewelry is the main use for gold in India. When a Hindu woman marries, she is
normally expected to bring a dowry of gold to her marriage. A bride will wear up
to 200 grams of gold on her wedding day in earrings, a nosepin, ring, necklace
and bangles.
In contrast, demand from institutional investors was subdued. Having snapped up
gold in January amid expectations of further price rises, profit-taking set in
and new investment dried up.
Gold struck a peak of $425.50 in January, shortly before the dollar went into a
tailspin. The report notes that the speculative sell-off of gold investments
appears to have continued in the second quarter of the year and may even have
intensified.
However, Jill Leyland, senior economist at the World Gold Council, said that
worsening financial market jitters and geopolitical tensions could tempt more
speculative buyers into the market in the coming months.
By Jane Padgham
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