Weakening Dollar and Global Recovery Contribute to Increased Demand for Gold

Weakening Dollar and Global Recovery Contribute to Increased Demand for Gold

NEW YORK-- October 22 2009 - The combination of a stronger global economy, an unchanged policy stance by the major central banks, and a weakening dollar increased demand for gold as a store of value in Q3. The gold price ended the third quarter at US$995.75/oz on the London PM fix, having surpassed the symbolic US$1000/oz level two weeks before the close of the quarter, according to World Gold Council’s latest Gold Investment Digest.

Gold exchange traded funds continued to grow in popularity over the quarter, reaching another record in tonnage terms. The total volume of gold purchased via the major exchange traded funds increased by 38.5 tonnes in the third quarter, taking total holdings to a record 1732.5 tonnes, the equivalent of US$55.5 billion.

While preliminary reports on third quarter trends in India suggest jewelry demand remained weak, the upcoming wedding and festival season indicated signs of seasonal improvement. Reports from China continued to be upbeat, while consumers in the US market still curbed discretionary purchases as a result of the economic downturn.

Separately, the European Central Bank announced a third Central Bank Gold Agreement, lowering the annual sales ceiling to 400 tonnes from 500 tonnes in the previous agreement.

Natalie Dempster, Head of Investment, North America, World Gold Council commented:

“A recovering global economy coupled with most major central banks keeping benchmark rates at record low levels increased demand for gold as a store of value, as some investors feared about future inflation. Moreover, we saw an improvement in risk appetite during the quarter, which also put more downward pressure on the dollar as investors sold US Treasuries in favor of higher yielding assets overseas, further increasing demand for gold as a dollar hedge.

“Market volatility decreased over the third quarter, albeit at a slower pace. While volatility is, in general, still higher than pre-recessionary levels, gold remained one of the least volatile commodities that we monitor on a constant basis.”

World Gold Council

World Gold Council’s mission is to stimulate and sustain the demand for gold and to create enduring value for its stakeholders. It is funded by the world’s leading gold mining companies. For further information visit www.gold.org.


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