Demand for gold 'to increase'

Demand for gold is likely to heat up in the coming months, thanks to positive prices for the metal.

David Holmes, director of precious metals sales at Dresdner Kleinwort, said that the current prices, which have seen some consolidation, are likely to persuade consumers to participate in gold investing, reports Reuters.

He said that the $900 an ounce mark is a psychological barrier to gold purchases, but this should change in the current climate.

"Physical demand for gold is definitely returning to the market, certainly sub-$900, and that interest just grows as we approach $850 [an ounce]," he said.

In related news, a report from Forbes suggests that China may surpass South Africa again in 2008 to become the world's largest gold producer.

China is also witnessing high demand from people wishing to buy gold thanks to the booming economy - in 2007 it was second only to India in terms of volume purchased.

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