Demand was up 9 percent year-on-year, and marginally above the previous peak of 2008 despite a 40 percent increase in the annual average price level between 2008 and 2010, the report said.
In value terms, annual gold demand surged 38 percent to a record of $150 billion. The fourth quarter also set a new quarterly record of $42 billion.
Jewelry demand was remarkably robust in the face of record prices in the majority of currencies. Annual demand for gold Jewelry rose 17 percent from 1760.3 tons in 2009 to 2059.6 tons. The rise in annual average prices over the same period was 26 percent. In value terms, this resulted in record annual Jewelry demand of $81 billion.
Investment demand, comprising bar and coin demand and demand for ETFs and similar products, remained more or less stable in 2010, down just 2 percent versus 2009. Physical bar investment was particularly strong during the year, recording an annual gain of 56 percent.
Conversely, demand for ETFs and similar products (as measured by GFMS) was unable to sustain the previous year’s remarkable levels and consequently was down 45 percent on an annual comparison. At 338.0 tons however, this was still the second highest year on record for ETF demand.
In 2010, “OTC investment and stock flows” almost halved from 2009 levels to 296 tons.
At the individual country level, India was the strongest growth market in 2010. Total annual consumer demand registered growth of 66 percent relative to 2009, which was largely driven by the jewelry sector. Demand surged during the second half of the year, encouraged by the festival season.
China was the strongest market for investment demand growth. Annual demand for bars and coins totaled 179.9 tons — an increase of 70 percent year-on-year. Thailand also made a very significant contribution to investment demand growth, with 2010 demand rocketing to 51.2 tons, a figure notable not only for the fact that it is a record in our data series, but also because it represented a swing from disinvestment of 10 tons in 2009, the WGC report said.
Although the pace of growth in demand for gold used in technology slowed somewhat in the fourth quarter, demand for 2010 was 12 percent higher than in 2009, as the electronics segment fueled recovery in the sector, which is witnessing a return to long-term trend levels.
Mine production in 2010 is estimated to have increased slightly, three percent higher year-on-year, as a number of new projects across a range of countries contributed to higher levels of supply.
The jewelry sector enjoyed the strongest recovery in 2010, with annual demand of 299 tons (17 percent) higher than in 2009. Indian jewelry demand rose 69 percent during the year to 746 tons, while China’s jewelry demand reached a new annual record of 400 tons.
The year 2010 was significant for the fact that central banks became modest net buyers of gold after 21 years of net sales. “We anticipate that this trend will continue, with further acquisitions by emerging market central banks and no resumption of significant sales by those in advanced economies. Following the recent completion of the IMF sales program, we see limited potential for further sales from signatories to the Central Bank Gold Agreement (CBGA),” the WGC said in its report.
The demand for ETFs and similar products of 338 tons was down 45 percent year-on-year. However, although well below the previous year’s remarkable levels, 2010 was nevertheless the second highest year on record for ETF demand. As at the end of 2010, gold holdings in gold ETFs and similar products totaled 2,175 tons, the report said.
The total supply of gold coming onto the market in 2010 reached 4,108 tons, a rise of 2 percent from 2009 levels. After a sharp year-on-year decline in the first quarter of the year, supply expanded throughout the remainder of the year. The underlying components of supply were mixed; the combined effect of a reduction in the supply of recycled gold (-19 tons from 2009) and a shift in the official sector to modest net purchases (-117 tons) were canceled out by a 136 ton year-on-year decline in producer de-hedging. The net effect on supply of these changes was zero, therefore the 74-ton year- on-year increase in 2010 supply was solely the result of growth in mine production, the WGC report said.
