Gold demand sets global record in 2011

Global demand for gold in 2011 rose to 4,067.1 tons worth an estimated $205.5 billion - the first time that global demand has exceeded $200 billion and the highest tonnage level since 1997, according to the World Gold Council’s Gold Demand Trends. The main driver for this increase was the investment sector where annual demand was 1,640.7 tons, up 5% on the previous record set in 2010 and with a value of $82.9 billion. The pre-eminent markets for investment demand in 2011 were India, China and Europe.

China and India remain the cultural heartlands of gold, generating 55% of global jewelry demand and 49% of global demand:

· India remains the largest country for demand with 933.4 tons, which is notable considering the volatility of the gold price and the weakness of the Indian rupee against the U.S. dollar during the second half of the year. Gold jewelry accounted for over 500 tons and the investment market demand reached 366 tons. Indian demand accounted for 25% of total bar and coin demand worldwide.

· In China, annual demand of 769.8 tons was up 20% year-on-year as a result of increases in both jewelry and investment. The largest rise was in investment, where demand of 258.9 tons with the value of RMB84.5billion leaped 69%. China jewelry demand increased every quarter of last year and was the largest single jewelry market worldwide for the second half of 2011.

There was also a surge in demand in Europe with the region posting its seventh consecutive annual gain to 374.8 tons. Germany and Switzerland were the main drivers of growth in the region as the Eurozone remains in turmoil and the need for asset protection continues to be a priority.

Central banks continued the trend established in 2010 of being net buyers of gold. Purchases by central banks soared from 77 tons to 439.7 tons. This reflects the need to diversify assets, reduce reliance on one or two foreign currencies, rebalance reserves and ultimately protect national wealth.

Marcus Grubb, Managing Director, Investment at the World Gold Council remarked, “What we can see from these 2011 figures is that there were two main factors driving the results: Asian growth and optimism on the one hand and Western desire to protect assets against uncertainty on the other. Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012. What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.”

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