As moths to a flame, investors are attracted to any asset class that is going up in price. Gold, which has returned an incredible 17.5 percent (average annual compounded return in US dollar terms) over the past decade, is not an exception to the herd-like behaviour of investors. The prospectus for the SPDR Gold Trust (GLD) (available here) includes a summary of world gold supply and demand data for the 2000 to 2009 period. The table clearly shows that demand for gold as an investment vehicle is exploding.
Jewellery remains the primary source of gold demand but the level of demand has fallen sharply in recent years. In 2000, jewellery accounted for 3,205 tonnes of gold demand but by 2009, it had fallen to 1,759 tonnes — a drop of almost half. Gold demand in industrial applications such as electronics and dentistry has remained fairly stable over the past ten years.
Investors can invest in gold either in physical form such as coins and bars or through exchange-traded funds (ETFs) such as the aforementioned SPDR Gold Trust (GLD). Demand for both sources are exploding — demand for coins and bars has increased from 166 tonnes in 2001 to 703 tonnes in 2009 and demand for gold ETFs have grown from zero to 617 tonnes.
![[Investment demand for gold is exploding]](https://CCapitalist.b-cdn.net/ccapitalist/wp-content/uploads/2010/11/gold_demand_2001_to_2009.png)
Update: You can find a linear gold demand chart here.
