Consumers take a shine to gold

A BOOMING global economy, stable prices and an uncertain economic and political outlook ensured that demand for gold sparkled in the second quarter of the year.

Figures today from the World Gold Council show that consumer demand for the yellow metal - including jewellery and retail investment - was up by 11% in tonnage terms and by 25% in dollar terms on a year earlier.

In contrast, demand from institutional investors fell as a result of less speculative buying in the face of falling prices. The gold price during the quarter averaged $393.27 an ounce compared with $408.44 in the previous three months.

The dollar's bounceback during the quarter was another factor behind the decline in institutional investor demand.

In India, the world's biggest gold consuming nation, demand was buoyant, boosted by a strong economy and the after effects of last year's good monsoon rains.

James Burton, chief executive of the World Gold Council, said: 'The fact that consumer demand is up for the second successive quarter is good news for the gold industry.'

But he added: 'It is important that we are not complacent. The rise in demand in key markets has been aided by strong economic growth and relative absence of price volatility, but gold's battle for share of wallet remains.'

Platinum jewellery, diamonds and other luxury goods including mobile phones are becoming increasingly popular gifts at the expense of gold.

The gold price rose to a one-month-high of $405.10 earlier this week as the dollar weakened following a surprise drop in US consumer prices.

A weaker greenback makes dollar-priced gold cheaper for holders of other currencies, increasing its safe-haven appeal.