Middle East leads global gold demand

All that glisters was quite literally gold for jewellery shops and precious metal wholesalers in the three months to July, according to new figures yesterday that showed consumer demand for the shiny stuff soared by 11 per cent.

All that glisters was quite literally gold for jewellery shops and precious metal wholesalers in the three months to July, according to new figures yesterday that showed consumer demand for the shiny stuff soared by 11 per cent.

China, Saudi Arabia and India led the global race to ditch the US dollar in favour of buying gold, helping demand from retail investors soar to their highest level since 1999. Despite the highest gold price for 15 years - at more than $400 (£218) an ounce - net retail investment demand from key markets rose by one-third to 79 tonnes during the second quarter of 2004, a report from the World Gold Council (WGC) revealed yesterday.

There was also a rush to buy gold jewellery, with demand soaring 8 per cent to 664 tonnes. A rising standard of living in China fed the Chinese predilection for putting savings into gold, with consumer demand jumping by one-third in Greater China during the period.

Although the impact of Sars subdued Chinese consumers in the first half of last year, a massive advertising campaign aimed at persuading young urban shoppers to invest in gold jewellery helped shift 50 tonnes of necklaces, rings and bracelets, 14 per cent more than the same period in 2002.

James Burton, the chief executive of the WGC, said: "Our promotional activities have clearly helped to boost demand in major markets such as Turkey, China and India."

Global consumer demand rose for the second successive quarter - by 25 per cent in dollar terms and 11 per cent in tonnage terms after a 12 per cent rise in the first quarter of 2004.

Record oil prices boosted demand across the Middle East, with gold demand rising 12 per cent in Saudi Arabia. The United Arab Emirates saw a 9 per cent increase, while a booming Indian economy helped to sustain strong demand.

Europe remained the one global weak spot, with demand falling by 5 per cent. The WGC said rising interest rates in the UK had "dampened optimism".