Demand for gold is set to remain strong in 2010, with uncertainty over the global economic recovery and ever growing interest from Asia underpinning the markets.
The World Gold Council's (WGC) Gold Demand Trends Report for the second quarter of 2010 forecasts demand for gold jewellery from India and China will be the main driver of the market for the remainder of the year.
Retail investment will also continue to lift gold demand in Europe amid concerns over the future of the euro and public debt levels. Demand rose 115% during the second quarter of 2010 to 84.8 tonnes in the continent.
Meanwhile, electronics demand is likely to return to higher historic levels after the sector showed further signs of recovery, especially in the US and Japan.
Marcus Grubb, managing director of investment at the WGC, said: "Economic uncertainties and the ongoing search for less volatile and more diversified assets such as gold will underpin investment demand for gold in the immediate future.
"Over the past quarter, demand for gold jewellery in key Asian markets has been challenged by rising local prices. Nevertheless, we are seeing a deceleration in the pace of decline in demand, providing a strong outlook for ongoing recovery in this crucial market segment."
In June, the price of gold soared to a record $1261 an ounce. Meanwhile, gold demand shot up by 36% to 1,050 tonnes. In US dollar, this rose 77% to $40.4 billion.
Exchange traded funds proved the most popular way of accessing the precious metal on the retail investment front, as demand lifted by 414% to 291.3 tonnes.
Meanwhile, global jewellery demand remained robust between April and June despite the higher prices. Consumers snapped up 408.7 tonnes during the period, just 5% below year-earlier levels.
Over the longer-term, demand for gold in China is expected to grow significantly.
A recently published report from the People's Bank of China and five other organisations to develop the domestic gold market will boost demand for gold among Chinese consumers, the WGC said.
