How Strong is Gold Demand?

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Since hitting all-time nominal highs above $1,900 an ounce, the price of gold has declined and essentially traded sideways for over a year. The price action has discouraged some investors, but others are still purchasing the precious metal in record amounts.

In the fourth quarter of 2012, total gold demand reached 1,195.9 tonnes, the highest fourth quarter total on record and the best quarterly haul behind the third quarter of 2011, according to the latest report from the World Gold Council. Total demand for the entire year slipped 4 percent to 4,405.5 tonnes, but with a value of $236.4 billion, it was an all-time record in dollar terms. In the bigger picture, annual gold demand was 15 percent higher than the average for the previous five years.

Strong gold demand in jewellery and among central bank helped to offset weaker demand in investment and technology industries. Gold demand in jewellery reached 525.3 tonnes in the fourth quarter of 2012, the strongest quarter since the first quarter of 2011.

India and China, the two largest jewellery-consuming markets, accounted for 56 percent of total annual jewellery demand. Meanwhile, jewellery demand in Russia increased 7 percent to 81.9 tonnes. For the entire year, gold jewellery demand dipped 3 percent to 1,908.1 tonnes as consumers in India experienced higher import duties and local prices, but overall demand in dollar terms still set a record of $102.4 billion.

Central banks are still buying in record amounts…

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