Gold demand stable as jewelry counters lower investment

LONDON, May 20 (Bloomberg): Gold demand was little changed in the first quarter as jewelry purchases countered declines in investment and central-bank buying, the World Gold Council said.
Global demand fell to 1,074.5 metric tons in the quarter, from 1,077.2 tons a year earlier, the London-based council said today in a report. The gain in jewelry usage represented the strongest start to a year since 2005 with buying up about 10 per cent in China, the biggest gold consumer. While bar and coin demand slid a combined 39 per cent, sales through bullion-backed exchange-traded products were the lowest in more than a year.
Bullion slumped 28 per cent last year, the most in three decades, on expectations that U.S. stimulus would slow. The drop had boosted demand for jewelry to ingots, particularly from Asia. Prices gained this year, partly as tension amid Russia's standoff over Ukraine spurred demand for a haven.
 "We're now in a lower price environment than we were two years ago, so for many people, jewelry has become more affordable," Alistair Hewitt, manager, market intelligence at the World Gold Council in London, said by phone yesterday. Bar and coin demand last year was "exceptionally high and we're not going to see a similar response this year. We're seeing a return to the long-term fundamentals of the gold market."
Gold for immediate delivery traded at $1,290.67 an ounce by 12:36 p.m. in London for a 7.4 per cent gain this year, according to Bloomberg generic pricing. It averaged $1,292.15 in the first quarter, down 21 per cent from a year earlier and 1.6 per cent more than the fourth quarter.
Global jewelry demand rose about 3 per cent to 570.7 tons in the latest quarter, with China's purchases rising to 203.2 tons and jewelry buying dropping 8.7 per cent to 145.6 tons in India, the second-biggest bullion user.
Global bar buying slumped 39 per cent to 216.4 tons in the three months through March and coin demand slid 33 per cent to 52.1 tons, resulting in the weakest combined bar and coin purchases since 2010's first quarter. Global consumer demand slipped 16 per cent to 853.3 tons, according to the report.
Total Chinese consumption fell 18 per cent and Indian usage slid 26 per cent as the government held restrictions on imports to curb a current account deficit. Some consumers were also reluctant to buy gold in the run up to Indian elections, the council said. China overtook India as the top user last year.