India and China drove the second-quarter's robust demand for gold, the World Gold Council said in its analysis of industry trends during the three-month period.

Total global gold demand for gold measured 919.8 metric tons, worth a near-record $44.5 billion, with broad-based support across all sectors and geographies.

Standout markets were India and China, as these two markets accounted for 52 percent of total bar and coin investment and 55 percent of global jewellery demand, the council said Sunday in its Gold Demand Trends report.

Gold demand in the second half of 2011 will remain strong owing to a number of key factors:

  • Despite a higher gold price, Indian and Chinese demand grew 38 percent and 25 percent respectively during the second quarter of this year compared to the same period of 2010.  This growth is likely to continue, due to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.
  • The impact of the European sovereign debt crisis, the downgrading of U.S. debt, inflationary pressures and the still-fragile outlook for economic growth in the West are all likely to drive high levels of investment demand for the foreseeable future.
  • Central banks are likely to remain net purchasers of gold.  Purchases of 69.4 metric tons during the second quarter 2011 demonstrated that central banks are continuing to turn to gold to diversify their reserves.

 The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment and expect the upward price trend to continue, said Marcus Grubb, managing director of WGC.

In addition, ongoing macro economic uncertainty, the continued sovereign debt crisis and widespread inflationary pressures, will result in gold demand remaining strong.