The gold jewelry market may soften further during the next six months despite jewelry wholesale, manufacturing and retail trade adopting strategies to deal with gold's price rise and volatility, AngloGold Ashanti Ltd. said Thursday.

The gold jewelry market has been adversely affected by gold's strong price rise to 26-year highs of $730.65 a troy ounce in May since the start of the year and particularly price volatility, the South African miner said in its second-quarter results statement.

Banks making margin calls to cover the higher value of gold inventory loans forced manufacturers to increase loan collateral or to repay loans by cutting production or liquidating stock, AngloGold said.

Total gold demand contracted by 16% during the first quarter of 2006 to 835 metric tons as a result of lower jewelry demand, according to figures from the World Gold Council.

In contrast, commodity investment inflows to the market are likely to continue, AngloGold said.

Investment in indexed commodity funds continues to grow and was estimated at $90 billion, much of it coming from long-only funds such as pension funds that are allocating a portion of funds under management to commodities.

"The expectation amongst market commentators is for this trend to continue, with the potential for significant further investment flows into the sector," the report said.

Central Bank gold sales during the second quarter "appear to have been low since January 2006" with sales estimated at 30-35 tons, AngloGold said.

Reported sales under the quota of the European Central Bank Gold Sale Agreement were between 315-320 tons, "which means that signatories to the agreement may sell up to a further 180 tons before the year-end of Sept. 26 if they are to utilise, in full, the agreed quota for 2006," AngloGold said.