LONDON, May 20 : Global demand for gold fell 16 per cent year-on-year to 701 tons in the first quarter of 2008, the lowest quarterly figure in five years, as bullion rallied to hit a record above $1,000 an ounce, the World Gold Council said.

But in terms of value, demand for gold rose 20 per cent to touch $20.9 billion in the first quarter of 2008 amid the global credit squeeze and inflationary pressures, the industry-funded group said in its Gold Demand Trends report.

Purchases for jewellery and investment fell 50 per cent in main consumer India due to high prices, but purchases from China and Russia rose 15 and 9 per cent, respectively, in the first quarter of 2008.

The Chinese typically are not afraid of buying on a rising market. There’s a strong investment element to a lot of gold buying, Jill Leyland, economic adviser to the WGC, told Reuters.

Gold has since corrected and stood around $906.30 on Tuesday.

India’s jewellery and investment demand stood at 71 tons and 31 tons, respectively, in the first quarter of 2008. Both were half the levels of the year-earlier quarter.

Global jewellery demand fell 21 per cent year-on-year to 445.4 tons, the lowest quarterly level since the early 1990s, while net retail investment demand dropped 35 per cent to 72.7 tons.

However, I am confident that the general investment environment remains positive. In other sectors, industrial and dental demand declined 5 per cent to 110.3 tons in response to the deteriorating US economy and a slowing in demand for consumer electronics. But in value terms, demand was equivalent to $3.2 billion, a rise of 35 per cent.

The supply of gold rose 6 per cent in the first quarter of 2008 due to an increase in scrap supply, while mine output was little changed at 593 tons. Central bank sales were 8 per cent higher than in the first quarter of 2007.

Metals consultancy GFMS compiled the data for the World Gold Council.—Reuters