India, China defy sky-high gold price, Q3 demand up

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold demand for jewellery and investment jumped in India, China and other Asian countries in the third quarter of 2007 despite high prices, driven by strong economic growth and firm local currencies.

Jewellery consumption in India, the world's largest buyer, rose 5.5 percent to 134.8 tonnes in the third quarter from a year earlier, while investment demand gained 3.9 percent to 50.3 tonnes, data from the World Gold Council showed.

China's jewellery demand jumped 24 percent to 74.8 tonnes in the third quarter, when gold recaptured $700 and began the uptrend. Investment demand in China, the world's third-largest consumer, rose 46 percent to 4.1 tonnes.

"It's the Asian mentality. One very simple psychology is if they don't buy today, it's going to be more expensive tomorrow," said Albert Cheng, managing director for Far East at the World Gold Council.

Spot gold was quoted around $804.20 an ounce on Wednesday -- within sight of a 28-year high $845.40 struck on Nov. 7. Gold has gained more than 30 percent in 2007 and is poised to retest the record high of $850 hit in January 1980.

"People have obviously accumulated a lot wealth and may be they like to spend it. People who make money in the stock market also like to reward themselves," said Cheng, who expected the buying trend to continue into the fourth quarter.

The prospect of growing consumption in India and China and the launch of exchange-traded funds in bullion trading cities are supporting the gold price.

Gold has been a haven in times of crisis for centuries and is gaining in popularity as an alternative investment to currencies and bonds. It is seen as a hedge against inflation and rose in value during the Great Depression of the 1930s.