LONDON (Reuters) - Investment is likely to continue making up the lion's share of gold demand this year, the World Gold Council's investment research manager said, after it surged in the first half of 2009 to almost 50 percent of consumption. Nonetheless jewellery buyers, typically the main drivers of gold demand, may be tempted back to the market later in the year should gold prices fall and fresh signs of economic recovery emerge, Rozanna Wozniak added. Wozniak said while jewellery and investment demand is being battered by the economic downturn, which has curbed consumer buying of gold, investment has benefited from the same instability. "What we have is two sectors (industrial and jewellery demand) which are largely cyclical in nature - as economic activity slows, that is obviously going to have an effect to some degree - and a countercyclical element of investment," she said. "At times, jewellery will take up the slack, and at times investment will take up the slack." With jewellery buying representing only 43 percent of demand in the first half, the market has changed significantly from the first six months of 2008, when it made up 63 percent of consumption against only 21 percent for investment demand. Wozniak said the diversification of gold demand away from its heavy reliance on the jewellery sector, primarily in India, was a positive step for the market. According to metals consultancy GFMS, Indian jewellery buying in 2004 made up more than a fifth of total gold fabrication demand.

Source