RI's demand for gold drops by 42 percent

JAKARTA (JP): Indonesia's demand for gold during the second quarter of this year dropped by 42 percent to 22 metric tons compared to the same period last year, according to the World Gold Council (WGC).

Leo Hadi Loe, WGC country manager for Indonesia, said the biggest drop during the second quarter occurred in May and June as political tension rose ahead of the People's Consultative Assembly, which ended on Friday.

Quoting from WGC's August gold demand report, Leo said political uncertainty prior to the Annual Session had caused a plunge in the rupiah's value and raised local gold prices.

"This caused consumers to delay gold purchases and even prompted them to sell their gold," Leo said in a news statement made available to The Jakarta Post on Saturday.

He said demand for gold jewelry in the second quarter was even worse than the demand for gold for investment needs.

Demand for gold jewelry, he said, declined by 47 percent from the same period last year, compared to the demand for gold as an investment, which dropped by only 17 percent.

Leo said total gold demand for the first semester of this year reached 49.6 tons of gold, which was 19 percent lower than during the same period in 1999.

"As of April this year, demand for gold was still relatively strong," he said.

He attributed the previous strong gold demand to a good crop harvest and the reintroduction of gold as a saving alternative for the Haj pilgrimage.

Leo further said the world's total demand for jewelry in the second quarter of this year reached 695.3 tons, dropping slightly by one percent from the same period in 1999.

Whereas jewelry demand during the first six months of this year reached 1396.4 tons, or a drop of four percent compared to the same period last year.

In contrast to Indonesia, several countries reported a sharp increase in jewelry demand during the first half of this year, according to WGC's report.

Jewelry demand in Turkey rose by 49 percent, in Mexico by 17 percent, in Malaysia by 22 percent, in Taiwan by 69 percent while the United Kingdom reported a growth of 12 percent, the council said.

WGC reported that gold demand in 27 countries remained strong, dropping only two percent to 789 tons during the second quarter of this year.

The council said the demand for the first semester of this year reached a total of 1584.2 tons, dropping by only 0.6 percent from the same period last year.

WGC chief executive Haruko Fukuda described the continued strong demand for gold as hope in light of the persistent weak demand for gold as an investment.

The council said the demand for gold as an investment in the second quarter of this year dropped by 22 percent, or down to 93.7 tons from the same period in 1999. (bkm)