ETFs fuel surge in gold demand

The surge in the demand for gold over the second quarter was fuelled by the growing use of ETFs, the World Gold Council says.

According to the WGC's Gold Demand Trends report, the largest contribution to the rise in gold demand came from ETFs tracking the precious metal, which grew by 414% to 291.3 tonnes.

WGC says this represents the second highest quarter of growth on record.

Investment in physical gold bars also increased, by 29% from Q2 last year to reach 96.3 tonnes.

Generally, investment demand for gold soared by 118% to hit 534.4 tonnes, far above the 245.4 tonnes in Q2 last year.

In total, gold demand in the second quarter rose by 36% to 1,050 tonnes, mirroring a strong appetite compared with the same time period in 2009.

WGC says the demand for gold will remain robust this year, based on accelerating demand from India and China, coupled with strengthening global demand for the precious metal.

WGC managing director of investment Marcus Grubb says: "Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future.

"Further, in light of lingering concerns over public debt levels and the euro, European retail investor demand has increased significantly."

He adds: "Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment."