Dollar demand for gold reached an all time quarterly record of $32 billion in the third quarter of 2008 as investors around the world sought refuge from the global financial meltdown, and jewellery buyers returned to the market in droves on a lower gold price. This figure was 45% higher than the previous record in Q2 2008.Tonnage demand was also 18% higher than a year earlier. Identifiable investment demand, which incorporates demand for gold through exchange traded funds (ETFs) and bars and coins, was the biggest contributor to overall demand during the quarter, up to $10.7 billion (382 t), double year earlier levels, according to Gold Demand Trends, released today by World Gold Council (WGC).The figures, compiled independently for WGC by GFMS Ltd, show retail investment demand rose 121% to 232 t in Q3, with strong bar and coin buying reported in Swiss, German and US markets. The quarter also witnessed widespread reports of gold shortages among bullion dealers across the globe, as investors searched for a haven. Overall, Q3 saw Europe reach an all time record 51 t of bar and coin buying and France became a net investor in gold for the first time since the early 1980s.Gold ETFs enjoyed a record quarterly inflow of 150 t in Q3, boosted by extreme levels of economic and financial uncertainty. The peak in inflows occurred in late September, triggered by the collapse of Lehman Brothers and a fear of banking sector failures. Net inflows surged by an unprecedented 111 t during five consecutive trading days, equivalent to $7 billion.As the financial crisis deepened these increases in identifiable investment demand were offset by outflows in ‘inferred investment’. This was characterised by hedge funds liquidating investment positions in gold as they were forced to raise cash and by institutions liquidating commodity index investments, including gold, as fears of recession deepened. The trend largely reflects gold’s better performance relative to other assets and also explains why the gold price did not perform better during the quarter in the face of very strong demand.Q3 saw a record $18 billion of consumer demand for gold jewellery with buyers returning to the market on lower price points, around and below $800, demonstrating the underlying positive sentiment towards gold and its recognition as a store of value. The biggest contributor to the positive trend was India which witnessed a rise of 65% in US$ value or 40 t relative to previous year levels, with the Middle East, Indonesia and China all enjoying rises of more than 40% in value or 10% in tonnage. There were however, strong declines in Western markets with the US down 9% in value and 29% in tonnes, and the UK down 5% in value and 26% in tonnes due to the overall decline in the retail market.James E. Burton, Chief Executive Officer of World Gold Council, commented: “Gold’s universal role as a store of value has shone through during this quarter helping attract investors and consumers to all forms of gold ownership. The rise in demand for gold bars and coins has been impressive as has the record rise in gold ETF inflows. Perhaps most encouraging is the return to positive jewellery buying which has been absent for several quarters due to the high levels of price volatility.“Looking forward, given the uncertainty that surrounds the global economy, gold’s safe haven appeal should continue, but so too will the possibility of heightened levels of activity in the speculative side of the gold market, therefore it is too soon to call an end to market volatility.”Despite a deteriorating global and domestic economic climate, demand in India, the largest market for gold demand, recovered during the third quarter, encouraged by lower gold prices, a good monsoon and the onset of the festive season. At 250 t, total consumer demand was 31% higher than Q3 2007 levels. In value terms, demand hit the record quarterly sum of $5 billion.Demand in Greater China rose 18% to 109 t, with the majority of this increase attributable to a strong rise in demand in mainland China (+16 t). Jewellery demand in the Middle East, which accounts for more than 90% of total consumer off-take in the region, rebounded in Q3 with tonnage demand up 15% on Q3 2007 and up 47% in dollar terms, hitting a new record of $2.8 billion. Retail investment demand, while relatively small in size at 7 t, recorded strong growth of 23%, and 57% in dollar terms. In Turkey total Q3 off-take, at 99 t, was up 15% on the levels of a year earlier, with investment demand smashing all previous records to reach 31.7 t.Industrial and dental demand declined to 104 t during the quarter 11% down on year-earlier levels. Electronics, the largest component of industrial demand, was hampered by the downturn in the global economy and a lack of confidence within world markets.Gold supply was down 9.7% on year-earlier levels, largely driven by a significant reduction in central bank sales. Sales under the Central Bank Gold Agreement (CBGA) totalled a provisional 357 t in the CBGA year ending September 26, the lowest annual figure since the first Agreement was signed in 1999.