The gold price increased modestly in the second quarter, supported by, among other things, ongoing inflation fears. Traditionally an inflation hedge, gold was sought by investors who had growing concerns about central bank�s exit strategies and the implications of a reversal in quantitative easing measures, according to World Gold Council�s latest Gold Investment Digest.

The gold price edged slightly higher in Q2 �09, ending the quarter at US$934.50/oz, on the London PM fix, compared with US$916.50/oz at the end of Q1 �09. The gold price fixed as high as US$981.75/oz on June 1 coinciding with the quarterly low in the dollar, which was pressurized, among other things, by growing questions about its future as the world�s reserve currency.

While other asset classes such as oil, the commodity complex in general, and equities outperformed gold during the second quarter, on a year-over-year basis gold posted a small gain while the others suffered sharp declines. Investors continued to increase their gold holdings via exchange traded funds in the second quarter, though at a much slower pace than the record amount of gold purchased via this channel in Q1 �09. Retail investment in coins and small bars also slowed in the second quarter, according to the anecdotal reports from dealers, while investors marginally increased their holding of gold futures.

Natalie Dempster, Head of Investment, North America, World Gold Council commented:

�Fears of future inflation drove investor interest as seen by the continued demand for the ETFs during the quarter. Traditionally, gold has been an effective inflation hedge, and as our recent study shows, also performs well during low to medium inflationary environments.�

The recent study, which examined the relative performance of four traditional inflation hedges (gold, real estate, Treasury Inflation-Protected Securities (TIPS) and general commodities), found that in two of the three historical scenarios gold would likely outperform other traditional inflation hedges. The study also found a strategic case for gold in the portfolio of an investor that already holds TIPS, due to the additional diversification benefits gold brings to a portfolio.

The full report can be found here: http://www.gold.org/deliver.php?file=/rs_archive/AssetAllocation_Inflation_July09.pdf

World Gold Council

World Gold Council�s mission is to stimulate and sustain the demand for gold and to create enduring value for its stakeholders. It is funded by the world�s leading gold mining companies. For further information visit www.gold.org.