Q4 gold demand to stabilise at 843 tonnes

The World Gold Council says gold demand in the fourth quarter will stabilise, after falling 10% last year, at 843 tonnes.

SINGAPORE (Reuters)  - 

Global demand for gold is expected to be steady around 843 tonnes in the fourth quarter of 2008 on festive demand and buying from investors, after falling more than 10 percent last year, the World Gold Council said on Friday.

"At the moment, I'd say it's difficult to tell but I would imagine the number might come in quite similar to last year. The early indications are they could be higher," said Marcus Grubb, managing director of WGC's investment research and marketing.

Global demand in the fourth quarter of 2007 dropped 17 percent to 843.0 tonnes due to a drop in jewellery buying by India, the world's largest gold consumer, and volatile prices.

"If investment demand comes in much stronger than last year as well in Q4, and jewellery is flat or down a little bit, you could have a big increase in Q4," he told Reuters on the sidelines of an industry gathering.

Jewellery sales in India were brisk during the Hindu festival of lights in mid-October, and there was also good demand from consumers in China, said Grubb.

"Certainly the initial indications on jewellery demand for Diwali were very positive. So we think, certainly the first half of Q4 looks pretty good," he said.

Jewellery accounts for more than 60 percent of total demand for gold, which was estimated around 3,547 tonnes in 2007. India devours 800 tonnes of bullion, more than 30 percent of annual global gold mine production, mostly as jewellery.

Dealers said buying from jewellers continued in India after the Diwali and the subsequent wedding season which lasts until early next year. Gold jewellery forms an important part of dowries as parents prefer to give gold to their daughters for financial security.

Gold was 27 percent below a lifetime high of $1,030.80 struck in March, which it has been unable to revisit after selling choked off recent rallies. It hit a two-month high of $931 in October but losses in equities forced investors to cash in to cover losses.

The WGC said on Wednesday investment demand rose 56 percent to 382.1 tonnes for the third quarter of this year as heightened levels of economic and financial uncertainty stirred safe-haven buying.

Gold's performance in the fourth quarter could determine its fate next year, especially as fears of a global recession intensified in the last quarter of 2008, said Grubb.

"Obviously the recession is now coming over to Asia. I am concerned that obviously as things have got worse in Q4, it may impact demand somewhat," he said. Signs of distress in the global economy mounted, with shares in U.S. bank Citigroup Inc plunging on fears about its future, oil prices falling and the future of U.S. automakers hanging in the balance. (Editing by Ben Tan)

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