Gold jewellery demand continues and investors pile in

gold ingots The World Gold Council believes retail demand will support the gold price through 2010

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Demand for gold jewellery will help underpin the price of the precious metal for the rest of 2010, according to the World Gold Council (WGC).

The price of gold has soared during the recession as investors sought a safe haven as shares and other assets fell.

In its latest quarterly bulletin, the WGC says retail investors appear to be big drivers of demand for gold.

And the WGC also anticipates growing demand from China if the country relaxes restrictions on the market.

In its report, for the second quarter of 2010, the Council said European retail demand was particularly strong.

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Gold demand rose 115% quarter-on-quarter to 84.8 tonnes in Europe, said the WGC, which represents gold producers.

In the second quarter, Europe accounted for 35% of the world's demand for small gold bars and coins.

In the past couple of years, European retail demand for physical gold products has soared.

In 2008, demand for gold bars and coins was 243 tonnes, rising to 293 tonnes in 2009.

In the early years of this decade, demand for gold across Europe often failed to rise above single figures.

New high

"It can be argued that, while many of these buyers undoubtedly turned to gold as a 'flight to quality'... their return to gold has proved resilient, even as a sense of optimism has started to pervade some sectors of the investor community," the WGC said.

During the second quarter of 2010 the gold price hit a new high of $1,261 an ounce.

Gold jewellery demand in India, the largest jewellery market, was little changed, down just 2% to 123 tonnes on the same period last year.

Demand for gold jewellery in mainland China rose by 5% to 75.4 tonnes.

Earlier this year, Beijing published a report, Proposals for the Development of the Gold Market. If implemented, the proposals could generate a huge expansion in demand from consumers.

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