Statistics Report on Demand and Supply of Gold Gold, of all the precious metals, is the most popular among

investors and traders. Gold and its derivatives are widely traded in the markets for many reasons. As a store of value, gold is a hedge against economic, social and political unrest. But as a commodity, gold is subject to the fundamentals of supply and demand. 55% of demand is attributable to just five countries -- India, Italy, Turkey, America and China -- and each market is driven by a different set of socioeconomic and cultural factors. India is the world's largest consumer of gold, as Indians buy about 25%, or 800 tonnes, of the world's gold every year. When consumers feel confident in their economy, they buy gold jewelry. But as history has shown, during periods of economic stress consumers reduce their purchase of gold jewelry (and sometimes sell the gold jewelry they already own), preferring to conserve their cash. The longterm demand for gold jewelry is looking up, since the growing middle class in China and India will almost inevitably buy more gold jewelry.

A total of 165,000 tonnes of gold, roughly equivalent to 5.3 billion troy ounces, have been mined from the beginning of human history to 2009. In the chart below from the World Gold Council, the 5-year average demand through 2008 was 3,599 tonnes and the average supply was 3,672 tonnes. This meant supply was slowly expanding each year, placing downward pressure on the price. There are gold mines on every continent except Antarctica. Mine production of gold remains stable at approximately 2,485 tonnes per year. As old mines play out, new mines begin production, helping to keep the amount of mined gold relatively consistent.

Recycled gold from scrap is an area not many investors consider as a supply of gold. Yet it accounts for a large and important source of gold each year. When prices are high enough, individuals and companies are encouraged to scavenge it from wherever possible. It's then available for sale to new investors. Gold is held by central banks and international monetary organizations, which hold about 20% of the above ground stock of gold as reserves. While there are some exceptions, central governments have been net sellers between 2004 and 2008. In 2008, central banks sold 248 tonnes of gold, and though they have not yet had a major effect on the supply, they are suppliers nonetheless.

The fastest growing source of demand during the last five years has been from investors. Exchange traded funds (ETFs) that invest in gold bullion have become so popular that they are the sixth-largest owner of gold in the world, just behind the central bank of France. The U.S. government, the nation's largest seller of gold, sold 615,500 ounces of gold bullion coins to investors in 2010.

Demand in the Jewelry Business

In 2010, gold processed to jewellery accounted for 54 per cent of all gold purchases, making jewelry the biggest contributor to gold demand. That is a rise of 17 per cent from 2009 to 2010. The increase is even more remarkable, as the gold price increased in the same period by 26 per cent. The biggest buyer of gold for jewelry is India, with 745 tonnes, followed by China (400 tonnes) and the United States (128 tonnes). Gold has been used for jewelry for 6,000 years. The reasons are its rarity, ease of mechanical processing, resistance to corrosion and its exceptional color. As gold in its pure form is often considered as too soft (and expensive), it is combined with other metals. The measure of fineness or carats reveals the gold content, ranging from 24 carat (999 fineness, or 99.9% gold content) to 14 carat (585 fineness, or 58.5% gold content). The fineness of gold is guaranteed by a hallmark. Another decorative use of gold is as gold foil, also called gold leaf. Gold foil has been used since the ancient world. Gold foil is thinner than the wave length of the visible light and can be applied to non-metallic surfaces, such as frames, books, furniture and architectural elements. Besides producing gold jewelry, this precious metal can be applied as a galvanized coating to plastic and metal. With the technique of fire gilding, porcelain and ceramics can also receive a golden surface. As a gold-mercury alloy, gilding has been known for more than 2,000 years. This used to be the only way to apply a durable golden surface to silver, bronze and base metals. The method of gilding was qualitatively extended in the late 19th century by the invention of galvanized coating.