Hmmm....If Demand is dropping so much then how can we expect the...

Hmmm....

If Demand is dropping so much then how can we expect the POG to keep rising? I would have thought that for a rise to be sustained it had to be demand driven.

I must admit to a sense of unease if the Indians in particular are buying that much less gold.

Anyway, here's the article...

Global gold demand slumps 16 percent due to high prices
Friday, May 26, 2006

Turkey remained the fourth-largest market for gold, despite a 35 percent drop in demand to 49.4 tons

LONDON - AFP

Worldwide gold demand fell 16 percent in the first quarter of 2006 as jewelry buyers were discouraged by the metal's high price, which hit 26-year peaks during the period, the World Gold Council (WGC) said.

Demand for gold in tonnage terms sank to 836 tons during the first three months of the year, compared with 990 tons in the same period of 2005, said the London-based organization.

That included a 22 percent slump in demand from the jewelry sector to 535 tons, according to the WGC.

Demand from investors -- excluding institutional interest such as pension funds -- decreased by 6 percent, while gold consumption from the industrial and dental sectors rose by 5 percent.

The fall in global consumption was "primarily as a result of a significant fall in jewelry demand, particularly in Asia and the Middle East -- a normal and predictable reaction to a volatile gold price," the WGC said in a report.

Gold prices hit $730.40 per ounce in London trading on May 12, the highest level since 1980, as investor buying escalated amid geopolitical concerns, particularly over Iran's disputed nuclear ambitions.

Investors seek refuge in gold, which is seen as a safe store of value in times of higher inflation and political tensions.

"Sustained interest from different groups of institutional investors drove the gold price to new 26-year highs in the first quarter of 2006," the WGC added.

Metal prices have since slumped on profit taking. On the London Bullion Market on Tuesday, the price of an ounce of gold stood at $666.70, up from $652.50 late on Monday.

In India -- the world's biggest consumer of gold -- demand plunged by 27 percent to 145 tons over the first quarter.

That was due to a 38-percent fall in consumption by India's jewelry sector. The country accounts for almost 20 percent of worldwide demand.

The United States held onto its position as the world's second-biggest gold consumer, but saw its consumption slip by 1 percent to 68.7 tons during the quarter.

Emerging economic powerhouse China took third place, with demand rising by 2 percent to 68.4 tons.

Turkey remained the fourth-largest market for gold, despite a 35-percent drop in demand to 49.4 tons.

The Middle Eastern region also recorded heavy falls, particularly in Saudi Arabia, the United Arab Emirates and Egypt.

In addition, the WGC estimated the global supplies of gold retreated by 15 percent to 868 tons during the first quarter compared with the same period last year.

The WGC is a commercially driven marketing organization funded by the world's leading gold mining companies.