The latest edition of "Gold Demand Trends" from the World Gold Council, using data compiled by independent research house GFMS Ltd., points to a range of elements that should support gold prices in the coming months. The natural seasonal uplift in gold jewellery from now on through to end-year and beyond is bolstered by sustained investor concerns over the euro, while speculative positions have recently turned neutral, removing some of the overhang.
For the longer term, the recent developments in China will prove positive with the government producing proposals to improve the development of the local market, thus potentially unleashing the huge potential for gold ownership in the country (see also Chinese spending on gold sextupled in the noughties).
Key figures from the document show that European investor buying ballooned from 7% of the world's retail investment demand in 2007 to 40% last year and accounted for 35% of the sector in 2010. With the sector as a whole still making important strides (US investors have not been sluggish either, registering a year-on-year increase of 19%), this meant that European retail investment demand for gold rose 115% quarter on quarter, taking up 85t of the metal in Q2 2010. US investors had a quiet first quarter, but were back with a vengeance in Q2, taking up 30t of gold against 15t in Q1, 26t in Q2 2008 and a quarterly average of 28t over 2009 as a whole.
European demand was again concentrated in the German speaking-countries (although WGC does point out that "demand" in this context relates to the location of the transaction, not necessarily the location of the final purchaser), with Germany registering Europe's largest year-on-year increase of 59% and Switzerland up by 19%. France experienced fresh purchases, but also profit taking, with the result that the net change year-on-year was just in the plus column - while the premium on certain bullion coins in France was reportedly pushed up towards 15% during the quarter. Germany in fact came in as the world's largest purchaser of retail gold investment products during the quarter at 44t against India's 42 and China's 36t.
China was also one of the strongest retail investment markets in the quarter with demand rising by 121% to 36t from 16t in Q2 2010, as investors increasingly looked at gold as a hedge against poor local equity and property markets, as well as reacting…
