Political Metals

China Business News

Central banks’ purchases in the second quarter more than quadrupled compared to the levels in the corresponding period of 2010, according to the council’s report. Central banks are likely to remain net purchasers of gold. “Purchases of 69.4 tonnes during the second quarter of 2011 demonstrated that central banks are continuing to turn to gold to diversify their reserves,” WGC said in the report.

It added that gold supply was 1,058.7 tonnes in the second quarter, a four per cent decline from 1,108.3 tonnes in the same period last year, as a result of an increase in net purchases by central banks.

Ten years ago when the gold price touched $1,000 an ounce, it seemed improbable, and now the industry forecast is pegged at approximately $2,000 by 2015.

Asked if the high price of gold would be reached even earlier than that, Unni told Gulf News: “Considering the current fundamentals, further gains in gold are quite possible, but it will be difficult to envisage a high in the near term.”

He added that gold remains “vulnerable” if investors have to sell positions to cover any sharp fall in equity markets.

As per WGC’s estimates, gold demand in the second half of 2011 is expected to remain “strong”.

“The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment and expect the upward price trend to continue,” Marcus Grubb, managing director, investment, at the WGC, said in the report.

Dubai The rising price of gold is unlikely to impact the trading patterns in the UAE, according to commodity analyst Pradeep Unni. “The UAE, especially Dubai, is largely a trade centre and also a favourite tourist destination. Thus, jewellery trade in the region is unlikely to get effected by the price spikes or drops,” he said, adding that gold trading in Dubai constitutes to about “16 per cent” of the global gold trade.

Retailer Damas, too, does not expect much of an impact on sales in value terms.

“Our belief is that consumers have become slightly accustomed to high gold prices. There is even a strong consumer sentiment that the price might increase further,” said Raj Sahai, director, retail, at Damas.

The UAE emerged as the most resilient market in the Middle East according to WGC report, with second quarter tonnage demand just one per cent below year-earlier levels at 16.1 tonnes.