London (Platts)--20May2008

Gold demand was down in volume terms in the first quarter of this year,
although demand in dollar terms was sharply higher, the World Gold Council
said Tuesday.

"With financial markets still reeling from the global credit squeeze, and
growing inflationary pressures dollar demand for gold reached $20.9 billion in
the first quarter of 2008, a 20% increase over the same period in 2007 and
more than double the level of four years earlier," the WGC said in a
statement.

But tonnage demand for gold at 701 mt was down 16% on the same period
last year and represents the lowest quarterly figure for five years, according
to the WGC's latest Gold Demand Trends report.

The drop was caused primarily by the sharp rise and unusually high
volatility in the gold price, which briefly touched record levels above
$1,000/oz in mid-March, the WGC said.

The data, compiled independently for WGC by UK-based consultancy GFMS,
show that the impact of these factors hit home particularly hard in the
"physical buying" markets of gold jewelry and coins and bars. Jewelry demand
declined 21% year on year to 445.4 mt -- the lowest quarterly level since the
early 1990s, the WGC said.

RETAIL INVESTMENT DOWN, BUT ETFS THRIVE

Net retail investment demand dropped by 35% to 72.7 mt in Q1, but there
was a stark contrast in the gold exchange traded fund market, where a
combination of continuing instability in the equities markets, ongoing fears
over the dollar and rising inflation, and increased understanding of gold?s
investment attributes helped spur demand, the WGC said.

Demand for gold ETFs was up 100% on Q1 2007 at 73 mt for the quarter,
representing $2.2 billion in dollar terms.

Overall demand for gold in China and Russia was up 15% and 9%,
respectively, on the same period last year, driven by increasing consumer
wealth and ease of access to attractive jewelry and retail investment
products, the report said.

But India, the largest market for gold and also the most price-sensitive,
continued to suffer from the impact of high and volatile prices, as jewelry
and investment demand, at 71 mt and 31 mt, respectively, were both half the
levels of Q1 2007.

"The first quarter of 2008 started as the previous year finished with
high and volatile prices. This has created tough trading conditions for large
parts of the gold market, but I am pleased to see how well gold has fought
for, and won, share of consumers discretionary spending," said James Burton,
CEO of the World Gold Council, in the statement.

JEWELRY DEMAND SEEN "MUTED" IN Q2

"Early indications are that jewelry demand is likely to remain muted
during the second quarter, although there has been positive news from the
Indian Akshaya Thritiya festival and the Indian and Middle East wedding
seasons, which are expected to generate additional purchasing," Burton said.

"Investment demand in the first few weeks of the second quarter has been
mixed with retail investors in traditional bars and coins encouraged by the
pullback in price, while ETFs have witnessed an outflow," he added. "However,
I am confident that the general investment environment remains positive."

The supply of gold was 6% higher in Q1 2008 than a year earlier,
primarily driven by increased scrap supply which, in turn, was a reaction to
the rising gold price. Mine output remained constrained, little changed from
Q1 2007 levels at 593 mt, while net official sector (central banks) sales were
8% higher than in Q1 2007, the WGC said, adding that as usual the main sellers
were Central Bank Gold Agreement signatories.