London (Platts)--15Nov2012/553 am EST/1053 GMT

Global gold demand in the third quarter of 2012 was 1,084.6 mt, down 11% from the record Q3 2011 figure of 1,223.5 mt, the World Gold Council said Thursday.

Gold demand remains "resilient," however, with Q3 2012 above the five-year quarterly average of 984.7 mt, according to the WGC's Gold Demand Trends report.

In value terms, gold demand was 14% lower year on year at $57.6 billion and the average gold price of $1,652/oz was down 3% on the record average Q3 2011 price.

"Gold is beginning to re-establish itself as part of the fabric of the financial system," said Marcus Grubb, managing director, investment at the WGC, in a statement.

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"In the medium term, the quantitative easing initiatives in the West and the continuing growth story in the East, particularly in India and China, coupled with the seasonally strong quarter coming up in Asia, are excellent indicators for further growth in the gold market," Grubb added.

Against a backdrop of continued global economic uncertainty and elections in China and the US, "it is clear from five-year rising demand trends that gold's fundamental property as a vehicle for capital preservation continues to endure, as evidenced by this quarter's increase in global ETF investment, up 56%, and continued purchasing by central banks, the ultimate long-term investors," Grubb said.

Central banks bought 97.6 mt of gold in the third quarter, the WGC said, noting that in six out of the last seven quarters, central bank demand has been around 100 mt, which is a sharp increase from as recently as 2010. The year-to-date figure for central bank buying is up 9%, the WGC added.

Investment demand -- he sum of exchange-traded funds and total bar and coin demand -- was 429.9 mt, down 16% compared with the same quarter last year, but was 23% above the five-year average.

The Indian market is showing signs of recovery, up 9% to 223.1 mt from 204.8 mt in Q3 2011 following increases in both jewelry and investment demand, the WGC said -- in comparison with Q3 2011, jewelry demand was up 7% to 136.1 mt and investment demand rose 12% to 87 mt.

"Investors moved into the imitation coin market, up 59%, whilst jewellery increased due to re-stocking ahead of the Indian wedding and festival season. Indians appear to have acclimatised to recent price trends and have been buying into a rising market," the WGC said.

In China, however, demand fell 8% to 176.8 mt in Q3 2012 from 191.2 mt in Q3 2011 due to falls in jewelry of 6% and investment of 12%, mainly as a result of negative sentiment surrounding China's slowing economy.

Both the supply of gold and recycling were down 2% in the third quarter compared to year-earlier levels, with mine production down 1% for Q3 2012, the WGC added.

--Andy Blamey, andy_blamey@platts.com
--Edited by E Shailaja Nair, shailaja_nair@platts.com

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