As per the World Gold Council’s Gold Demand Trends for 2010, global demand for the yellow metal struck records: The year’s demand hit a 10-year record of 3,812.2 tonnes, the fourth quarter setting a new quarterly record, central banks became net purchasers for the first time in 21 years, and all this on the back of recorded rising prices.

The annual demand of 3,812.2 tonnes was 9 percent more than 2009 levels and even slightly above the 2008 peak, despite a 40 percent increase in the annual average price level between 2008 and 2010. The value of gold demand last year stood at US$150bn, rising 38 percent y-o-y. The fourth quarter also set a new quarterly record of US$42bn.

Jewellery demand, which outshined as the strongest demand, increased 17 percent or by 299 tonnes from 1760.3 tonnes in 2009 to 2059.6 tonnes. The rise in annual average prices over the same period was 26 percent and value of jewellery demand stood at US$81 bn. In the fourth quarter, the jewellery demand surged 13 percent to 575.2 tonnes y-o-y

India and China took the lead in creating the demand and accounted for 51 percent of global jewellery and bar and coin demand in 2010.

India

The country accounted as the strongest growth market in 2010, with gold jewellery demand up 69 percent in the year to 746 tonnes (which was 13 percent above the previous peak in 1998, and annual consumer demand rising 66 percent over 2009 to 963.1 tonnes. The festive season in India and consumer expectations of rising prices contributed to a surge in demand in the second half and particularly fourth quarter of 2010. In Q4, demand rose 47 percent from Q4 2009 to 210.5 tonnes.

China

The country was coined as the strongest investment demand market for the year, wherein China annual demand for bars and coins totalled 179.9 tonnes – an increase of 70 percent y-o-y and valuing around US$7 billion. Chinese demand is expected to increase during the year as economic growth in China remains strong, while Indian gold jewellery demand should show resilience in the face of higher price levels, with some opportunistic buying on price dips.

Central banks become net buyers

A structural shift in central bank policy towards gold meant that in 2010 central banks became net buyers of gold for the first time in 21 years, removing a significant source of supply to the market.

Investment demand

Comprising bar and coin demand and demand for ETFs and similar products, remained more or less stable in 2010, down just 2 percent versus 2009, but was the second highest year on record at 1,333 tonnes, which equated to US$52 billion ( rising 23 percent over US$43 billion in 2009). According to reports, The opening weeks of 2011 in the gold market have been the gold price of 6 percent in January resulted in a shake-out of investment positions in the Western markets, with falls in ETF tonnage and a decline in the net long position on COMEX. This has been counterbalanced by very substantial physical demand flows in Asian markets, illustrated by a sharp rise in premiums in a number of markets across the region.

Demand for gold used in technology was 419.6 tonnes, 12.4 percent higher than in 2009. Total supply is estimated to have increased marginally, 2 percent higher year-on-year for the full year 2010, while within total supply, recycled gold, which accounts for 40 percent fell 1 percent y-o-y to 1,653 tonnes.