Global diggers: demand for the yellow stuff up 12% to 981 tonnes in first three months of 2011

Chinese and Indian buyers aren’t broke, and are behind the surge in demand, but you will never guess how much gold was bought for pure investment.

Investment demand grew by 26% to 310.5 tonnes from 245.6 tonnes in the first quarter of 2010, mainly due to bar and coin demand which increased by 52% year-on-year.

This outlook is driven by sustained jewellery demand from China and India which amounts to US$16 billion as well as net purchasing from official sectors as central banks diversify their reserves, prompted by continued uncertainty over the US economy and Europe's sovereign debt concerns.

The quarterly average gold price hit a new record of US$1,386.27/oz(London PM Fix), its eighth consecutive year-on-year increase.

India and China, the two largest markets for gold jewellery, together accounted for 349.1 tonnes or 63% of total jewellery demand, a value of US$16bn. China’s jewellery demand reached a new quarterly record of 142.9 tonnes ($6.4bn) up 21% from 118.2 tonnes in the first quarter of 2010.