Gold demand of 990 tonnes in the second quarter was 7 per cent lower than in the same period last year and 10 per cent lower than in 2010, new figures show.

The
World Gold Council said weaker demand in the public sector, in jewelry, investment and technology, was partially offset by the public sector in the shape of central bank purchases.

The organization also said that gold supply declined by 6 per cent year-on-year, attributing this to lower levels of recycling.

The gold price averaged $1609.50/oz during the three months ended 30 June, 7 per cent above the average in the April-June period in 2011. For that reason, there was only a 1 per cent year-on-year fall in the value of gold demand.

“Gold’s performance reflects the continuing challenging economic climate," said Marcus Grubb, managing director of investment at the World Gold Council. "A softness in India and China, who between them represent over 45 per cent of the total second quarter jewelry and investment demand accounts for much of the slowing of global gold demand.

“However, through all the uncertainty, it is clear that gold’s fundamental properties as a vehicle for capital preservation and a source of liquidity continue to endure," Grubb said. "This is evident from the activity of central banks, the ultimate long-term investors, which continue to increase their gold holdings to diversify reserves and protect against reliance on one or more foreign currencies."

For the first half of the year, gold demand of 2,090.8 tonnes was 5 per cent above the previous year and 14 per cent above the five-year H1 average of 1,828.7 tonnes.