Demand for gold comes from three sources:
- jewellery making
- the technology industry, and
- investment, which includes demand for gold bars and coins, as well as demand for exchange traded funds (ETFs) and similar products.
Demand for gold – and hence its price – can be significantly affected by macroeconomic factors, such as inflation, exchange rates and reserve policies, and by global political and economic events. Gold is often purchased as a store of value in periods of price inflation and weakening currencies.
In 2010, total demand for gold was approximately 3,812 tonnes, as shown in chart [x]. This was an increase of 9% from 3,493 tonnes in 2009. In value terms, demand for gold rose by 38% to a new high of US$150bn.
2010 gold demand (tonnes)
Change in demand 2009 to 2010 (%)
India was the main cause of higher jewellery demand, with 2010 being a record year at nearly 746 tonnes. Demand in China was also strong, rising 13% to 400 tonnes. Jewellery demand in many other Asian countries was lower, however, as consumers reacted to higher prices. The Middle East, the US and much of Europe also saw declining jewellery demand. Russia was one exception, with demand rising 12%.
The electronics sector makes up the bulk of technology demand. Demand from electronics companies was 287 tonnes, up 16%. Demand for gold used in other industrial and decorative applications increased by 12%, while dental use fell 5%.
The modest change in investment demand disguises some significant movements, with a 56% increase in demand for gold bars and a 45% fall in demand for ETFs and similar products. Growth in demand for bars and coins was driven by China, making it the second largest market behind India. Concerns over inflation and the poor performance of alternative investments were behind the increase. Although demand for ETFs and similar products fell sharply from its 2009 peak, 2010 was still the second highest year on record.