High gold price fails to kill demand

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The Independent Online
HIGHER gold prices last year failed seriously to dent demand, which was near record levels in 1992, the World Gold Council said yesterday in its review of the year.

It also produced evidence that the price is still underpinned by a shortage of supplies of gold because demand has grown 27 per cent over the past three years while supply has risen by only 14 per cent. 'The 1993 estimates suggest that supply- demand fundamentals remain tight,' the council said.

In 1993, the supply of gold fell 1.5 per cent or 49 tonnes to 3,217 tonnes but demand fell only 1 per cent.

Investors in developed countries bought 153 tonnes, 30 per cent more than the year before, in the wake of widely reported moves into the market by investors such as George Soros, the fund manager.

The heaviest buying was in the third quarter of the year when 66.8 tonnes changed hands.

This estimate gives only an indication of trends because it excludes demand from investing institutions as well as gold bar demand in Europe and North America. Some estimates put institutions' purchases as high as 600 tonnes.

Demand for new gold coins was up 47 per cent to 84 tonnes, the highest in seven years.

Identified demand in 1993 was 2,432 tonnes, based on purchases thought to account for about 75 per cent of total demand.

The council said this slight decline on 1992 was because of the higher price, recession in Europe and Japan, a reduction of trade inventories and an attempt to cool the Chinese economy.

Chinese demand, in particular, has helped buoy up the gold market, but in the second half of the year purchases fell back because of a government austerity programme. After explosive growth in the previous two years, consumption ended 11 per cent down last year.

While investors helped raise demand from developed countries by 3 per cent, developing markets fell by the same proportion.

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