RAMPANT economic growth in India and China have propelled consumer demand for gold jewellery to $38 billion (£20.6 billion).

The World Gold Council said that the record figure for the 12 months to June was driven by favourable conditions in key markets and promotion of the metal.

The gold price has been comparatively stable, in particular in the past six months, when the price oscillated between $420 per ounce and $440 per ounce. The gold price in London was $445.50 per ounce yesterday.

The positive trend shows no sign of abating. This comes less than two years after most of the world’s key gold consumption markets reported stagnant conditions as metals such as platinum enjoyed increased popularity.

The council, which is the marketing arm for the world’s leading goldminers, said that the June quarter had seen record demand in India and a third-successive quarterly increase in Turkey, another key gold jewellery market. The strong demand more than offset a weak performance in the UK, where gold jewellery purchases fell 14 per cent.

Demand in China, a small but growing market, was up 12 per cent year-on-year.

Demand for gold last year, including for investment and industrial purposes, also outstripped supply by 152 tonnes.

The London-based council spends $50 million a year promoting gold jewellery and investment products. Aligned trade partners such as jewellers spend another $50 million.

James Burton, chief executive of the council, said: “The figures are encouraging, not just for the gold market as a whole but also for the council due to the volume of statistical and other evidence that points to the effectiveness of the promotional campaigns that we are conducting.

“By 2003, gold jewellery demand in all markets other than Turkey was either stagnant or in decline.

“We have witnessed a turn-around over the last two years but we must build on this in the future. It is imperative that we not only maintain but increase our promotional efforts if gold jewellery is to either retain or grow its share of consumer spending.”

Mr Burton said that the massive gold demand in the first six months of this year meant that the second half may be more subdued.

A higher gold price could also deter investors. However, in India, the single biggest market for gold jewellery, the price of gold in rupees is off its peaks from late last year. India accounted for 517.5 tonnes of the world’s 2,611 tonnes of jewellery demand in 2004-05. The world’s second-most populous nation also accounted for 100.2 tonnes of the 342.7 tonnes of gold purchased by retail investors.

Investors have increasingly flocked to gold as a hedge against a weak US dollar, while the precious metal continues to be viewed by some as a haven during times of inflation.

The launch late last year of streetTRACKS Gold Fund, an exchange-traded fund on the New York Stock Exchange to complement the Gold Bullion Securities fund in London, proved a big success.

GFMS, the leading precious metals consultancy, has forecast that the gold price could hit a 22-year high of $500 per ounce by next May.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive