Gold demand increases sharply

The demand for gold among investors increased sharply during the first three months of 2009, official figures show.

The World Gold Council announced today the total demand for gold rose to 1,016 tonnes from January to March, representing a 38 per cent increase from a year ago.

In terms of demand for gold as an investment, the figure rose by 248 per cent.

The rise has been linked to the uncertain economic climate, as gold is usually seen as a safe investment during times of uncertainty.

Consumer spending, however, has dropped with demand for gold jewellery down 24 per cent compared to last year.

Aram Shishmanian, CEO of the World Gold Council, said in a statement: "There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define investment behaviour in the next decade.

"Gold, as one of the few assets that has held its value during the current economic crisis, has been sought out by investors who are drawn to its proven protective attributes as well as safeguarding themselves from the erosive effects of future inflation.

"The shift in the balance of demand that we have witnessed this quarter, where the gold price has risen despite a severe drop in jewellery and industrial demand, perfectly demonstrates the robust nature of gold's fundamental supply and demand dynamics.

"While jewellery demand is unlikely to return to more positive territory in current market conditions it remains a key market driver. Affinity for gold jewellery remains and we are confident that demand will grow as consumer confidence and purchasing power returns."