Trade group sees signs of recovery in gold demand

[March 19, 2010]  DENVER (AP) -- Investors have shied away from gold as the price has risen. Jewelry makers and industrial companies are somewhat more enthusiastic, an industry trade group said.

The World Gold Council said Wednesday that demand for gold in jewelry and industrial uses like electronics manufacturing improved in the last quarter of 2009. That trend continued into the new year and should be sustained by a strong global economy, the trade group said.

The outlook for gold investment was mixed, however, after a sharp drop in the fourth quarter. The council believes investors will put money into gold no matter what way the economy goes, either as a safe haven or a hedge against inflation. Analysts were more conservative, noting that gold investment fell for most of 2009 and that prices are expected to be mixed this year.

"I'm puzzled at where the investment went in quarters two through four and so far I haven't seen it return in quarter one this year," said Tom Pawlicki, a commodities analyst with MF Global Research in Chicago.

Overall, demand among investors, industrial users and jewelry makers totaled 819.7 metric tons in the last three months of 2009. That was down from 1,077.1 metric tons in the year-ago quarter, the council said.

Jewelry, the biggest market for gold, had the smallest decline of the year in the fourth quarter -- down 8 percent -- as stronger demand in India and China offset weaker markets in western countries.

That was an indication some consumers are adjusting to higher prices, the council said. Gold jumped 38 percent in the quarter to an average of $1,099.63 an ounce and hit a peak of $1,227.50 an ounce on Dec. 3.

Pawlicki and other analysts say the worldwide demand for gold has been softer because of the higher prices, and investors have turned to other precious metals such as silver and platinum.

The industrial and dental uses sector saw an 11 percent increase to 99.7 tons, largely because of fresh demand from electronics manufacturers.

"What we've seen is the beginnings of, and I don't want to overstress this, but the beginnings of what seems like a bit of recovery in both jewelry and industrial," said George Milling-Stanley, the council's managing director for government affairs.

For the year, gold demand totaled 3,385.8 metric tons, compared with 3,305.7 metric tons in 2008.

Jewelry consumption fell 20 percent to 1,747.3 metric tons; investment rose 7 percent to 1,270.9 metric tons; and industrial and dental use fell 16 percent to 367.6 metric tons.

Because of the rising prices, the gold demand was valued at a little more than $100 billion in 2009 for the second consecutive year.

[Associated Press; By SANDY SHORE]

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