Gold demand hits record high of $58 billion

Bullion Vault via Wikimedia Commons

Financial instability in the euro zone and a downgrade of the U.S. government's credit rating touched off a record gold rush among investors in the third quarter, an industry group said Thursday.

Global demand for gold rose 6 percent to 1,054 metric tonnes for the three months ended Sept. 30, setting an all-time high of nearly $58 billion in value terms, the World Gold Council (WGC) said in a new report.

The jump in demand for gold was driven primarily by investors seeking shelter from global fiscal and macroeconomic uncertainty. Investment demand for gold rose 33 percent year-over-year to 468.1 tonnes, generating record quarterly demand of $25.6 billion, WGC said.

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"Increasing levels of inflation, the U.S. credit rating downgrade, a worsening euro-zone sovereign debt crisis and the lackluster performance of many assets drove investors to increase holdings in gold in order to protect their wealth," Marcus Grubb, WGC's managing director for investment, said in a statement.

Investment demand for gold jumped despite a sharp drop in the price of the yellow metal in September, which encouraged a wave of profit taking among bar and coin investors, WGC said. However, price gains in July and August led the quarterly average price of gold to rise 39 percent year-over-year to $1,702 an ounce, according to WGC.

Demand was especially heavy in Europe, where investors more than doubled their appetite for the precious metal. Investment demand in Europe increased 135 percent year-over-year to reach a record quarterly value of 4.6 billion euro ($6.2 billion), WGC said.

Chinese jewellery demand rose 13 percent vs. the year-ago quarter, while demand in India, the world's largest consumer of gold, was sluggish. High inflation and greater volatility in the local gold price caused Indian jewellery demand to fall 26 percent in tonnage, although buying has since recovered ahead of the country's wedding season, WGC said.

Demand for gold bars and coins increased 29 percent to 391 tonnes, or $21.4 billion. Gold exchange-traded funds (ETFs) and similar investment products had inflows of 77.6 tonnes in the third quarter, a gain of 58 percent year-over-year, WGC said.

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