One can't talk about demand without at least mentioning the other side of the equation—supply. Global gold supply stands at 1,051.1 tonnes for Q2 '12, down 6 percent compared with this time last year, but flat compared with the first quarter of 2012.
Flat is likely where supply will stay. Mine production will eventually increase, but the major new mines aren't scheduled to start production until next year, and current production ran into various problems ranging from uncooperative severe weather to production interruptions at various mines.
Recycling has dropped 12 percent, compared with Q2 '11, to 367 tons. Recycling supply is extremely sensitive to price spikes—people wait until gold is seemingly at crazy highs before hocking grandma's jewelry. As gold prices have settled down, fewer people are offering up their scrap for sale. The exception is in India, where price increases above the 29,000 rupees per 10 grams mark flushed gold into the market.
Once again, watching official-sector purchasing has become a very important part of understanding the gold market, and one where, unfortunately, there is precious little data—that and tracking the Indian rupee.
It's clear the worlds' governments are nervous, and that they're buying almost regardless of price. How long that continues remains a critical question for gold demand, and thus prices.