According to the World Gold Council’s report on ''Gold Demand Trends'', the annual demand for the yellow metal was up by a fraction of around 0.4 percent to 4,067.1 tonnes in volume and by 29 percent to $205.49 billion.

There was a 25 percent increase in the demand for jewellery which stood at $99.18 billion and dropped in volume terms by 3 percent to 1,962.9 tonnes. The WGC states that the jewellery segment performed well in the times of the soaring gold prices. India stood its repute of being the largest market for gold jewellery in 2011 also, followed by China, the U.S., Russia and Turkey respectively. But looking at the fourth quarter of 2011, gold jewellery demand in China crossed that of India. China’s gold jewellery demand was up 26 percent to $7.13 billion, while India’s gold jewellery demand in value terms was down 31 percent (on y-o-y basis) to $5.59 billion. The WGC states that in the quarter, that India faced a weaker Diwali season and high and volatile prices, which led consumers to demand lighter weight gold jewellery with lower price points. According to the WGC, demand in China was low due to price volatility till late December when it sprung up again by lower prices and as the trade started building inventory for the Chinese New Year.

In the annual period of 2011, strong growth was seen in investment demand which touched $61.71 billion rising 34 percent in value and by 5 percent in volume to 1,640.7 tonnes.

The WGC reported that demand in the fourth quarter of 2011 was also driven mainly by investment. The global gold demand in the said quarter rose in value terms by 21 percent (on y-o-y basis) to $55.19 billion and dipped by 2 percent in volume terms to 1,017 tonnes. There was a small 5 percent increase in demand for gold jewellery, touching $25.86 billion, which was a record as WGC states. In volume terms demand was lower by 15 percent (on y-o-y basis) to 476.5 tonnes. Investment demand in the said quarter was up 46 percent to $23.24 billion and in volume terms it rose 19 percent to 428.2 tonnes.

Marcus Grubb, Managing Director, Investment 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”. He further added that, “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 demand terms”.

Supply of gold in the year 2011 dropped 4 percent to 3,994 tonnes, mining production increased by 9 percent to 2,821.7 tonnes ( a record), and supply of recycled gold slipped by mere 2 percent to 1,611.9 tonnes.

The WGC summarises the demand for gold in 2011 as the year of two halves. The year was described with dichotomous trends, manifest in price stability in the first half, followed by higher than average volatility during the second.

Source: http://diamondworld.net/contentview.aspx?item=6735