World gold demand continues rise in Q1
(UPDATE: Updates after conference call, adds quotes on outlook, paras 18-20)
By Sara Marani
LONDON, May 24 (Reuters) - Global gold demand continued to grow in the first quarter of 2001, rising five
percent to 825.9 tonnes, the World Gold Council (WGC) said on Thursday.
The WGC said in its quarterly Gold Demand Trends publication that demand in the 27
markets monitored by the industry-funded organisation set a new first quarter record,
boosted by strong performances in India, the United Arab Emirates and Mexico.
The strong rise in Indian consumption, which at 243 tonnes was 23 percent up on the
depressed first quarter of 2000, was due to a buoyant season of marriages and festivals
during the quarter.
``A further boost came from (Indian) retailers restocking following good sales over the
last six months,'' the report said.
Other regions where gold consumption was strong during the first quarter were the
United Arab Emirates, where demand was up 17 percent year-on-year, another first
quarter record, and Mexico, up 10 percent.
JEWELLERY AT NEW RECORD, INVESTMENT DEMAND DOWN
The WGC said an upward trend in jewellery demand remained firm, with consumption up
six percent at 734.5 tonnes -- also a record for the first quarter of the year.
U.S. gold jewellery sales turned in a strong performance, ``aided by a fashion swing back to chunky yellow-gold items and by some consumers,
concerned over economic slowdown, cutting back on more expensive stone-set items in favour of plain gold.''
The swing to gold also boosted jewellery demand in Japan, which was 19 percent higher than a year earlier at 9.5 tonnes.
In Europe, jewellery demand was largely unchanged from a year earlier at 51.1 tonnes -- making up nearly all of total gold demand, which stood at
51.9 tonnes.
In the key Italian market, gold jewellery demand was 13.7 tonnes, the same as the first quarter of 2000, the WGC said, adding: ``While not yet certain,
this may prove to be the end of the two-year decline in Italian demand.''
By contrast, global investment demand remained subdued, falling three percent from a year earlier to 91.4 tonnes.
But together with smaller increases in some other markets, the overall results more than compensated for the dip in investment demand as well as for
sharp falls in Turkey and Taiwan, where demand fell 38 percent and 31 percent respectively as a result of economic difficulties, the WGC said.
KEY FOR FUTURE
The main issue for future gold demand was whether a U.S. economic slowdown would hinder growth.
``In the immediate future, economic slowdown may dampen growth in the U.S. and some other markets, but the underlying trend in gold jewellery
consumption is strong,'' said WGC Chief Executive Officer Haruko Fukuda.
``With the additional funds which the industry is providing and the fashion swing back to yellow gold, I am confident that we shall see continued
healthy demand in the future.''
The report also highlighted events during the quarter that would affect demand in India -- the world's largest consumer -- in the coming months.
Those included the devastating Gujarat earthquake in January, which would probably have some negative impact, the reduction in customs duty
announced in February's budget, which should boost demand, and a shift in both gold imports and jewellery fabrication away from Ahmedabad to
other centres, notably Jaipur.
During a conference call, WGC manager for economics and statistics Jill Leyland said if a recent bullion price spike were repeated, some initial
dishoarding could be expected.
``If the price were to rise further, I would expect -- especially in Asia and the Middle East -- to see a little dishoarding...if it continues to be volatile I
would expect that to choke off demand somewhat,'' Leyland said. ``It the price trend continues upwards then it would increase investment potential.''
Gold's spot price rose nearly 10 percent to around $300 a troy ounce at the end of last week on the back of an influx of fund activity in New York and
Asia. By 1540 GMT on Thursday the price was quoted around $280.
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