The higher price of bullion combined with a global recession has hit gold jewelry

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buying, but jewelry should start moving off the shelves again once consumers get used to paying more.

Top executives of the world's largest gold miners voiced concern about demand for jewelry -- a key component of overall gold demand -- when they spoke at a told Reuters Global Mining and Steel Summit in New York this week.

"Jewelry demand will go up and down, but overall, the burgeoning population in China, the Middle East and India will, over time, continue to drive the demand for jewelry, and I think that demand will come back," said Richard O'Brien, CEO of the world's No. 2 gold producer Newmont Mining Corp.

Jewelry buying dropped 11 percent to 2,139 tonnes last year, yet still comprised 57 percent of total gold demand, according to a survey by precious metals research firm GFMS.

Last week, the Bombay Bullion Association said gold import into India, the world's largest consumer of the yellow metal, had nose-dived for the first two months of the year, as the price of gold in rupees rose to record highs.

"I think if gold falls back to the $800 level, you will see demand in India pick up," Frank Holmes, CEO of U.S. Global Investors, speaking at the Mining Summit. The San Antonio-based fund manager has over $2 billion of fund assets.

STICKER SHOCK

Despite rising gold prices mining executives clearly were concerned about tumbling physical demand.

Aaron Regent, CEO of Toronto-based Barrick Gold Corp, the top gold miner, said higher prices initially act as a "sticker shock" to jewelry buyers.

But he said that over time they should become desensitized and consumption should resume.

Not only are consumers purchasing less gold jewelry, high gold prices have actually spurred many consumers to cash in on their holdings, especially in India and other parts of Asia, where the move to recycle gold could offset any demand recovery.

Regent noted that strong investment demand has made up for waning physical demand, pushing gold prices higher.

The world's largest gold-backed ETF, the SPDR Gold Trust, commonly called GLD, said it held a record 1,041.53 tonnes of bullion as of March 12, replacing Switzerland as the world's sixth-largest holder of gold.

Meanwhile, mints in the United States, South Africa, Canada and around the world have reported unprecedented demand for gold coins.

PSYCHOLOGICAL COMPONENT

Peter Marrone, Canadian miner Yamana Gold Inc., said there was an emotional aspect attached to gold prices that could not be measured by supply and demand.

"I think that the demand today that significantly compensates for the possibility of a reduction in jewelry demand, is the demand for a safe haven," Marrone said.

Investors generally view gold as a safe haven in times of political and economic chaos because it has no counter-party risk and the metal's value is independent of any sovereign power.

An economic recovery should bolster physical demand, they said.

"If we see strong economies starting to return, that tends to put the wheels eventually underneath jewelry buying," said Tye Burt, CEO of Kinross Gold, Canada's No. 3 gold miner.

Chuck Jeannes, CEO of Canada's No. 2 Goldcorp, said demand tended to pick up quickly as buyers adapted to the higher gold price.

"They don't put off buying gold jewelry forever. Eventually, they become comfortable with the new metal price and they get back in the market. So, I expect that to happen again this time," Jeannes said.