Gold remains firm in European session as geopolitical tensions in the Middle East and North Africa raised demand for safe-haven assets. Moreover, growing inflationary expectations make gold's inflation-hedge characteristic appealing. Currently trading at 1377, the benchmark Comex contract continues hovering around the highest level in a month. A report by the World Gold Council unveiled that global gold demand increased around +9% in 2010 with demand in all categories, except for ETF investments, rose during the period. Gold imports by India soared to a record level last year as driven by a jump in jewelry demand.

Demand for gold grew +9.13% to 3812.2 metric tons in 2010, after falling -8.35% in the prior year as the aftermath of global economic crisis. Although the jewelry's market share of the gold market has dropped since 2007, physical demand for gold jewelry remains the single largest component of end-user demand. In 2010, jewelry demand gained +17.0% to 2059.6 metric tons, representing 54% of total demand. The biggest growth driver was, however, retail investment (coins, bars and medals) which surged +34.0% to 995 metric tons during the year. This category represents a quarter of total gold demand. ETF investment plunged -45.2% to 338 metric tons, following a jump of +92.3% in 2009.

Geographically, India imported a total of 918 metric tons in 2010, compared with 800 metric tons initially projected as jewelry demand rallied +69% to 746 metric tons. In China, demand for jewelry also reached a fresh record of 400 metric tons. The 2 fast-growing Asian countries, namely China and India, together constituted 51% of global jewelry and bar and coin demand in 2010.

In other news, regarding the gold gift investment product by the World Gold Council and China's Industrial and Commercial Bank of China (ICBC), the plan currently has over 1 million account holders and ICBC said it sold 15 metric tons of gold products last year, and about 5 metric tons in January. We expect heightening inflationary pressures in China will drive higher demand for the metal.

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