RAPAPORT... The World Gold Council (WGC) determined that the global demand for gold remained above the $100 billion mark for the second straight year. Identifiable investments in gold rose 7 percent, while the demand for exchange-traded funds (ETFs) demand was up by 85 percent for the year. The council also found that the overall demand for gold fell by 11 percent year over year. The average price for gold, based upon closing prices in London, increased by approximately 12 percent to $972.35 per ounce during 2009.

Aram Shishmanian, the chief executive officer (CEO) of the WGC, explained that 2009 was a year that clearly illustrated the diversity inherent in the global gold market.

"As the year progressed, a rebalancing of gold market fundamentals occurred, ensuring that as investment demand came off from the exceptional levels seen in the first quarter, total demand for the year remained robust, thanks to a rebound in jewelry and industrial demand," Shishmanian stated.

“Gold’s broad demand and supply drivers provide a unique balance in the face of economic volatility and uncertainty," he added. "This ensures gold retains its intrinsic appeal irrespective of the prevailing market conditions."

The WGC described fourth-quarter demand for jewelry as mixed, despite its current record prices, due to the decline in consumer demand for jewelry based on economic conditions.

India retained its position as the largest gold-consuming nation as its demand picked up by 27 percent in the fourth quarter. For the full year, India's gold demand fell 19 percent, while the demand for gold jewelry from China increased by 2 percent in the fourth quarter, helping to boost the country's full-year demand by 6 percent. Gold demand from the U.S. fell 17 percent in the fourth quarter of 2009.

"Overall, although jewelry demand continued on its weakening trend in the fourth quarter, there are signs that the pace of decline is losing momentum and that consumers are becoming accustomed to gold prices at higher levels," the WGC noted. "Nevertheless, the outlook for jewelry remains largely dependent upon the price level; any dips would likely draw out surges of buying interest, while new record highs would keep jewelry consumers sidelined until such time as they stabilize."

LH