Gold Demand Pushed Through $US100 Billion Barrier as Investors Turned to Recognized Store of Value

February 18, 2009

Wednesday February 18, 2:00 am ET

NEW YORK & LONDON–(BUSINESS WIRE)–Sustained investor interest in gold over the course of 2008 against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102bn, a 29% increase on year earlier levels. According to World Gold Council’s (“WGC”) Gold Demand Trends, identifiable gold demand in tonnage terms rose 4% on previous year levels to 3,659 tonnes.

As shares on stock markets around the world lost an estimated $14 trillion in value, identifiable investment demand for gold, which incorporates exchange traded funds (ETFs), and bars and coins, was 64% higher in 2008 than in 2007, equivalent to an additional inflow of $US15bn. Over the year as a whole, the gold price averaged $872, up 25% from $695 in 2007.

The most striking trend across the year was the reawakening of investor interest in the holding of physical gold. Demand for bars and coins rose 87% over the year with shortages reported across many parts of the globe.

The figures compiled independently for WGC by GFMS Limited, showed jewelry demand up 11% in dollar terms at almost $US60bn for the whole year, but down 11% in tonnage terms at 2,138 tonnes. The adverse economic conditions across the globe paired with a high and volatile price impacted jewelry buying in key markets, but resilient spending on gold jewelry indicated the strength of underlying demand when the market offered attractive price points.

Industrial demand in 2008 was another casualty of the global economic turmoil, down 7% to 430 tonnes from 461 tonnes in 2007. With the electronics sector the main source of industrial demand, reduced consumer spending on items such as laptops and mobile phones had a direct impact on gold demand.

Aram Shishmanian, Chief Executive Officer of World Gold Council, said:

“These figures confirm that investors around the world recognize the benefits of holding gold during this time of unprecedented global financial crisis, recession and concerns regarding future inflation. Gold has again proven its core investment qualities as a store of value, safe haven and portfolio diversifier and this has struck a chord with uneasy investors.

“While current market conditions have impacted consumer spending on jewelry, purchasers in many of the key gold markets understand gold’s intrinsic investment value and continue to buy.

“The economic downturn and uncertainty in the global markets that has affected us all is unlikely to abate in the short term. Consequently, we anticipate that gold, as a unique asset class, will continue to play a vital role in providing stability to both household and professional investors around the world.”

Total demand remained very strong in the fourth quarter of 2008, up 26% on the same period last year at 1036 tonnes or $26.5bn in value terms.

The biggest source of growth in demand for gold in Q4 was investment. Identifiable investment demand reached 399 tonnes, up from 141 tonnes in Q4 2007, a rise of 182%. The main source of this increase was net retail investment, which rose 396% from 61 tonnes in Q4 2007 to 304 tonnes in Q4 2008. The most dramatic surge was in Europe, where bar and coin demand increased from just 9 tonnes in Q4 2007 to 114 tonnes in Q4 2008, a 1,170% increase. ETF holdings broke new records during the quarter. Although the net quarterly inflow was down from the level of the previous quarter, the growth rate on Q4 2007 was a strong 18%.

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February 9, 2009

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