Gold Demand Trends, which is compiled for the World Gold Council by independent research house GFMS Ltd., records that total tonnage demand for gold in the first quarter of the year rose by 38% year-on-year, while in value terms the increase was 36%. This was driven by a 248% rise in ETFs, bars and coins to 596 tonnes with ETFs (up 540%) accounted for 465 tonnes of gold absorption. Net retail investment was up 33% to 131 tonnes despite some dishoarding in eastern markets. The largest investor in coin and bar was Germany, where inflationary fears saw demand quadruple to 59 tonnes, while Swiss growth was even higher at 437%, taking it into second place at 39 tonnes. The US came in third, more than doubling to 27 tonnes as investors hedged against financial and economic risk.The impact of this surge in investment demand meant that coins+bars and ETFs accounted for 554 tonnes during the quarter, a massive increase of 472 tonnes against the first quarter of last year. This more than offset a 122-tonne decline in jewellery demand, which was 352 tonnes against 475 tonnes in Q1 2008. Investment demand for coins and bars in India turned to disinvestment as 17 tonnes were returned to the market. Three other countries were net disinvestors during the quarter, namely Japan, Indonesia and Thailand, while in 18 of the countries surveyed investment demand was lower in the first quarter of this year than in the Q1 2008. Despite this, global investment demand increased by 53 tonnes or 59% overall, with the largest percentage increases registered in Europe, where demand rose by more than six-fold.In percentage (and tonnage) terms, the largest fall in jewellery demand came from India, which more than halved to just 35 tonnes - and the first quarter of 2008 had itself been relatively weak. For at least twenty years India has been the world's largest jewellery consumer as gold has a religious significance as well as maintaining its role as an investment-come-risk-hedge, but in this past quarter demand for new gold dried up with consumers generally preferring to exchange or sell gold jewellery rather than making fresh purchases. The domestic economy has started to be affected by the global downturn, especially in terms of unemployment among expatriates; this has affected income levels and constrained discretionary purchases such as gold jewellery. Furthermore, the Council argues, gold fulfilled its role as an investment as consumers took profits on existing jewellery holdings that had been purchased at lower prices. As a result Indian demand in the first quarter of this year was just 10% of total, while China, where conditions were buoyant, increased its market share to 26%. China and Hong Kong were the only regions that registered an increase in jewellery demand in the period and the average fall in jewellery demand across the world was 25%. Countries other than India that registered a substantial fall were concentrated in the Gulf, along with Turkey (-40%), Russia (-27%, a notable change in trend from a country whose jewellery demand had been growing rapidly) and the US, where demand for jewellery fell by 30%. The US' fall stemmed from high unemployment. poor credit conditions and an elevated gold price, and the US jewellery sector continued to experience bankruptcies. Supply, meanwhile, increased by 34% against the first quarter of 2008, driven by a surge in scrap supply, which reached 558 tonnes, an increase of 55% or almost 200 tonnes. Mine production was up by just 16 tonnes, but a sharp contraction in dehedging meant that mine supply effectively increased by 135 tonnes. With low central bank net sales, total supplies of gold in the quarter amounted to 1,144 tonnes, an increase of 292 tonnes against Q1 2008. With demand up by 266 tonnes, the market was arguably slightly tighter in the first quarter of this year than it was in the first quarter of last. Even so, there was an effective surplus of 115 tonnes in the quarter, that would have been mopped up by institutional investment, stock movements and other elements.The Council states that anecdotal reports suggest that jewellery demand picked up in the first few weeks in the second quarter as the gold price stabilised at levels slightly below the highs that prevailed in the first quarter. The current extraordinary global circumstances imply that the prospects for a recovery in jewellery demand will remain doubtful and demand could well remain under pressure.