Investors buy 361 tonnes of gold via ETFs in 2010

Globally, investors bought 361 tonnes of gold through exchange-traded funds (ETFs) in 2010, according to the Gold Investment Digest of World Gold Council. However, the yearly inflow was 41 per cent lesser than that in 2009.

With this, the total holdings by ETFs rose to a new high of 2,167 tonnes, worth $98 billion. In 2009, the net inflow into ETFs was 617 tonnes. The total gold supply, including mine production, recycled gold and official sector transactions, totalled 2,993.3 tonnes during the first nine months of 2010, a 3.1 per cent decline from the same period during 2009.

However, gold jewellery demand totalled 1,468 tonnes during the first nine months of 2010, increasing by 18 per cent from the same period during 2009.

Gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19 per cent increase over the same period in 2009.

Recycling activity during the nine months ending September 2010 declined by 2.7 per cent to 1,234.8 from 1,268.8 on year-earlier levels mostly due to the upward trend in gold prices. This has also been partly driven by continued economic growth in emerging economies, especially India and China that substantially contribute to recycled gold supply.

In India, gold medallions and bar sales were strong during 2010 as a whole, and in particular in the fourth quarter, compared to the same period of the previous year. Consequently, the Reserve Bank of India has authorised seven more banks to import bullion. The WGC expects the impact of this measure to be visible during 2011.

Indian investors are responding to strong economic growth coupled with a higher rate of inflation and are raising their allocation to gold to a substantial share of their holdings.