Demand for gold up 30%

GOLD was in big demand during the first three months of this year, despite a sharp increase in its price triggered by the sliding dollar.

Figures today from the World Gold Council show consumer demand for the yellow metal - including jewellery and retail investment - was up by 12% in tonnage terms on a year earlier and 30% in dollar terms.

The gold price during the quarter averaged $408 an ounce compared with $352 in the same quarter last year.

In India, already the world's biggest gold-consuming nation, demand increased by 21%, boosted by a strong economy and rural customers benefiting from the after-effects of 2003's good monsoon rains.

Jewellery is the main use for gold in India. When a Hindu woman marries, she is normally expected to bring a dowry of gold to her marriage. A bride will wear up to 200 grams of gold on her wedding day in earrings, a nosepin, ring, necklace and bangles.

In contrast, demand from institutional investors was subdued. Having snapped up gold in January amid expectations of further price rises, profit-taking set in and new investment dried up.

Gold struck a peak of $425.50 in January, shortly before the dollar went into a tailspin. The report notes that the speculative sell-off of gold investments appears to have continued in the second quarter of the year and may even have intensified.

However, Jill Leyland, senior economist at the World Gold Council, said that worsening financial market jitters and geopolitical tensions could tempt more speculative buyers into the market in the coming months.