Mumbai: Demand for gold, which is witnessing a surge in prices, is likely to remain strong in the second half of 2011, following high inflationary pressure and weak alternative investment sources like the equity markets and realty sector, World Gold Council (WGC) said on Thursday.
   
"Going forward, we expect that the third quarter will see strong performance (by gold) leading to a good fourth quarter. This is mainly as I don't see the equity market bouncing back, and realty sector struggling with high interest rates making loans costlier," WGC Managing Director (West Asia and India) Ajay Mitra told reporters here after releasing the Gold Demand Trends report for Q2 2011.
   
The yellow metal's performance is also likely to do well on good kharif output expectations, better agricultural income, longer marriage and festival season in the second half of the year, he said.
   
About Q2 performance, Mitra said, "The second quarter of 2011 has been excellent for investments in gold around the world, especially in India.
   
With inflation reaching record numbers and equity markets witnessing extreme volatility, investments in gold continues to prove popular as investors look to diversify their portfolios and protect wealth".
   
In Q2, India was the strongest growth market with total consumer demand for gold rising 38 per cent in tonnes compared to Q2 2010.
   
In value terms, demand for gold went up 70 per cent to Rs 53,800 crore in Q2 2011 from Rs 31,730 crore in Q2 2010.    

India constituted 32 per cent of the global demand for gold in Q2 2011 which combined both jewellery and investments. Jewellery demand surged by 17.1 per cent to 139.8 tonne in Q2 2011 from 119.4 tonne in Q2 2010 due to the festive season and widespread expectation among Indian consumers about a further increase in the price of gold.
   
In value terms, jewellery accounted for Rs 30,290 crore in Q2 2011, an increase of 44 per cent over Rs 21,000 crore in Q2 2010, WGC said.
   
Investment demand, comprising demand for bars, coins as well as ETFs (Exchange-Traded Funds), rose 78 per cent at 108.5 tonnes from 61 tonnes in the same period last year.
   
In value terms, investments surged by 119 per cent to Rs 23,510 crore in Q2 2011 from Rs 10,730 crore in Q2 2010.    

However, global gold demand in Q2 2011 declined by 17 per cent at 919.8 tonnes from the remarkably strong levels of 1,107 tonnes in the same period of 2010, WGC said.
   
Gold demand in value terms grew 5 per cent year-on-year, reaching USD 44.5 billion from USD 42.6 billion in the second quarter of 2010.
   
This is the second highest quarterly value on record, only fractionally below the USD 44.7 billion that occurred in the fourth quarter in 2010.
   
"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," WGC Managing Director (Investment) Marcus Grubb said.
   
"In addition, ongoing macro economic uncertainty, the continued sovereign debt crisis and widespread inflationary pressures will result in gold demand remaining strong," he said in a statement here.

(Agencies)