Asian economies 'hunger for gold'

Asian economies 'hunger for gold'

NEW DELHI (Reuters): Demand for gold in the crisis-racked Asian economies is reviving, a senior World Gold Council (WGC) official said on Tuesday.

"There is evidence that the demand is now coming back to Southeast Asia," Dick Ware of the WGC's Centre for Public Policy Studies told Reuters.

"Their economies are starting to mend again and given the propensity of demand for gold in these countries -- and it was proved that they could use it last year -- I expect demand to grow again," Ware said on the fringes of a conference organized by the Geneva-based World Economic Forum (WEF).

Ware said when the Asian crisis struck last year those who owned gold were fortunate. Koreans and Thais sold gold, finding it to be an asset when currencies were collapsing.

"What you see in the current quarter, and I expect that to continue, is repurchasing of gold," Ware said.

"People used their gold last year and early this year when they were in distress. They have seen how valuable it is and now want to rebuild their stocks."

Referring to gold demand in Japan, Ware said the council saw the country as a mature market that was unlikely to see any significant changes.

Gold demand in China, which was still a controlled economy, was increasing in the short term but he did say by how much. "But it has to be on a rising trend."

China's gold industry was going through a progressive deregulation and the government had dramatically modified pricing arrangements.

He said China would deregulate the industry over the long run and per capita consumption would grow.

"India last year consumed about 740 tons of gold, China consumed 220 tons of gold. If the Chinese consume gold at the Indian rate, then you are talking of additional demand of five, six or seven hundred tonnes for the long term."

India, which imports almost all its gold, strengthened its position as the world's largest consuming country in 1997 with demand surging 45 percent to an all-time high of 737 tons, WGC data shows.

Gold prices firmed during early European trade on Tuesday as the effects of Monday's fund-led sell-off in New York faded, dealers said.

London gold fixed at $293.35 a troy ounce in the morning, down on Monday afternoon's $294.70 but above the late U.S. lows underneath $292.00.

Spot prices held steady through overnight trade in Asia before nudging higher again in Europe.

Spot gold was last at $293.15/$293.55, 45 cents up on its previous New York close.

Silver was also higher at $4.87/$4.89, up two cents on New York, platinum was last $3.00 down at $350.00/$352.00.

Palladium was up $1.00 at $271.00/$276.00.

"We are still tending to be slightly positive on gold," said one London dealer.