EDITORIAL & OPINION — FACTS ‘N’ FIGURES — Gold gains some lustre in Asia

The Asian economic crisis has continued to have an adverse effect on gold demand in those markets, with the exception of Vietnam. However, gold consumption turned positive in the second quarter as demand statistics recovered from the devastating impact of the widespread selling back to the market that distorted the picture in the first quarter and the end of the Korean gold collecting campaign.

In South Korea, most institutions ended their gold collection campaign in March. As a result of the improving economic situation and the start of the wedding season, gross consumption for the quarter recovered to 26.5 tonnes, just 13% lower than in the second quarter of 1997. Jewelry demand, at 24 tonnes, accounted for 91% of this.

In Indonesia, the political and economic turmoil had contrasting influences on the gold market. Economic necessity and the high price of gold in rupiah terms continued to encourage selling of jewelry, although the amount sold, 11 tonnes, was only a fraction of the 72 tonnes sold in the first quarter. In contrast, concern of the possible collapse of the banking system prompted record gold investment demand of 7 tonnes. In addition to the recorded investment demand, there were purchases of 3 tonnes of jewelry.

In Thailand, there was some recovery during the quarter, but net offtake remained small compared with normal levels for the second quarter. There was a slight increase in jewelry demand, but this was followed by dishoarding when schools reopened in May. Gross purchases in the quarter amounted to 5 tonnes, while there was a net dishoarding of 2 tonnes, resulting in a net demand of 3 tonnes.

Demand in Vietnam during the traditionally slow second quarter was 11 tonnes, 10% higher than in the same period last year. Gold jewelry demand was relatively static, but investment demand was boosted by the failure of savings interest rates to match inflation. The state bank of Vietnam is still reluctant to lift its 18-month ban on gold imports, and border smuggling remains the main source of supply. In Malaysia, net demand fell to 2.8 tonnes, a 52% fall from the second quarter of 1997. Gross purchases totalled 3.3 tonnes, of which jewelry amounted to 2.8 tonnes.

Gold demand in Singapore failed to recover in the second quarter after falling sharply during the first three months of 1998, signalling that the retail market is remaining cautious in the face of continued depressed economic conditions. Total demand fell by almost half, to 2.5 tonnes, compared with levels in the second quarter of 1997.

— The preceding originally appeared in Gold Demand Trends, the quarterly publication of Geneva-based World Gold Council.