India, China Continue to Lead Gold Buying

In the second quarter gold demand by India and China — the world’s top two gold buyers during the past decade — jumped 38% and 25% over last year despite a 17% drop in global demand on record prices.

Despite the drop in total demand for the 2nd quarter to 919.8 tons, the value of that gold hit a record $44.5 billion as prices jumped 26%.

Together India and China accounted for 52% of global bar and coin investment and 55% of global jewellery demand, according to the latest report from the World Gold Council. Demand for gold in those nations is expected to outstrip the rest of the world during the second half as well due to their rapidly growing prosperity, high inflation and some holidays when gold buying soars. Added to these other factors is the insecurity caused by the European and U.S. sovereign debt crises.

Gold purchases by central banks, which are likely to remain robust, totaled 69.4 tons during Q2 2011.

For 2010 total gold demand 750 tons for India and 700 tons from China, representing 38 percent and 32 percent jumps, respectively from 2009. India’s gold demand has soared 23% so far this year from the same period of 2010. Demand for physical bullion soared 76% in May compared to April and 161% over the same month of 2010. Demand for silver was even stronger than the demand for gold, soaring 500% from April and 222% from May of 2010, suggesting that much of the demand is driven by the desire for security against global currency fluctuations.

In China consumer gold demand is soaring as well. During July and August alone gold shops in Suzhou city, Jiangsu province sold as much gold was was sold during the entire second half of 2010.