Gold Demand Rises as China Gets Gold Fever

Demand for gold increased 4% from the same quarter last year, even as the spot price of gold has increased 17% during the same time, according to the World Gold Council.

Identifiable gold demand jumped to 831.7 tonnes of gold worth $17.3 billion compared to the first quarter of 2006, in which buyers sought 797.8 tonnes of gold worth $14.2 billion.

The big mover: Chinese demand. Consumer demand for gold in China was up 31% on the same quarter last year, as the Chinese flocked to buy gold jewellery and commemorative "lucky balls", particularly around Chinese New Year in mid-February.

Demand in the world's largest gold market, India, also surged in the first quarter, rising by 50% on Q1 2006 figures. Strong economic growth and the onset of the wedding season played a role.

You can read the details here: http://tinyurl.com/2c8gxm

Still, the problem for us now is that gold is getting shellacked. Look at the following weekly chart of gold. While long-term uptrends are still in place, in the short-term, gold looks ready to test support around the $640 to $645 area. Stay tuned.

Check out my new gold and energy blog at MoneyAndMarkets.com