India and China largest buyers of Gold: WGC

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Central Banks on a gold buying spree
According to World Gold Council, demand for gold was 919.8 tonnes during the second quarter of the calendar year. Overall gold demand declined 17% during April-June quarter as compared to previous year same quarter but it grew by 5% in terms of value.

The average price of gold has moved up 26% year-on-year (y-o-y) basis and 9% over previous quarter. The price of gold witnessed a jump during May and most of the June over the concerns of Eurozone debt crisis and a steep fall in world equity prices.

Major contributors to overall growth were India and China. Despite a higher gold price, Indian and Chinese demand increased 38% and 25% respectively during the quarter as compared to previous year quarter due to number of factors such as relative economic prosperity, high inflation rates, good monsoon in India, as well as number of forthcoming festivals and holidays in which gold purchasing is customary.

Demand for gold jewellery, bar and coin was more than gold ETFs from these two nations. Asian economies consider investment and buying of jewellery or gold bars as one and the same which comes with similar motives of wealth preservation, savings and 'rainy day' insurance.

Central banks kept purchasing gold in order to increase the exposure to the precious metal. The central banks registered net purchases of 69.4 tonnes of gold during the quarter to diversify their reserve assets. Figures suggest that the official sector will remain a net buyer of gold throughout 2011.

Whereas, demand for Gold ETF registered a slowdown as compared to last year. Demand for Gold ETFs and similar products was down 82% to 51.7 tonnes from 2010's levels. In India, ETFs have rapidly gained in popularity during recent months.

Gold as an asset has witnessed a strong growth as compared to other investment vehicles during the period due to the European sovereign debt crisis and the downgrading of US debt.

The fragile outlook for economic growth in Europe and US is likely to drive high levels of investment demand for gold in coming future.

Read more about: gold, economy, inflation, europe, united states
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