Double-Digit Decline in U.S. Gold Jewelry Demand

The high price of gold continues to have a detrimental impact on the worldwide jewelry market as demand in this sector for the precious metal fell by 6 percent, year-over-year, in the first quarter of 2012, the World Gold Council said Thursday. The value of jewelry demand, meanwhile, grew by 14 percent to $28.3 billion.

Gold jewelry demand was weaker in all but six countries and clearly reflects the year-over-year 22 percent increase in the average gold price of gold to 1,690.57, according to the WGC Gold Demand Trend report for the first quarter of 2012.

In the U.S., demand fell 10 percent to 17.6 tons. In addition to the high price of the precious metal, the report blames high gas prices and cautious consumers. In value terms, gold increased by 10 percent to $958.2 million.

In Italy, demand slid 14 percent to 3.5 tons “as the negative economic environment took its toll,” according to the report. In the U.K., demand dropped 4 percent to 3 tons.

India, the world’s largest consumer of gold and gold jewelry, was largely responsible for the worldwide decline, according to the report. An unexpected substantial increase in the import tax on gold and the introduction of an excise duty on gold jewelry resulted in a three-week countrywide strike among jewelers until the government agreed to end the excise duty. A weaker rupee also added to the decline.

Meanwhile, China dominated the jewelry market as demand increased 8 percent to 156.6 tons in the first quarter. China accounted for 30 percent of all demand for the period, making it the largest gold jewelry market for the third consecutive quarter.

Demand in Russia was also robust with a 28 percent increase in the first quarter to 20.4 tons, attributed partly to stock building among the trade. However, the repot notes that “historically low inflation, GDP growth, improving consumer confidence and real wage gold,” contributed greatly to the gains. “Gold remains the most popular metal of choice among Russian jewelry consumers.”

Overall, global gold demand in the first quarter fell by 5 percent to 1,097.6 tons, the WGC reports. “This decrease was largely to be expected given the introduction of import taxes in India and high gold prices,” the report states. “Demand for the quarter was underpinned by increased demand in China, continued central bank purchasing and inflows into exchange-traded funds.”

Gold demand value for the period increased 16 percent to $59.7 billion. Gold demand includes its use in jewelry, technology, investment and official sector institutions (such as world banks).

“China and India have seen continuing economic growth and whilst China’s economy is expected to slow, it will nonetheless surpass the rates of growth in the West,” said Marcus Grubb, managing director, Investment at the World Gold Council. “As we previously forecast it is likely China will become the largest source of demand for gold in 2012.”

U.S. Sees First Increase in Gold Jewelry Demand in 7 Years

Gold jewelry making a comeback.

Gold jewelry demand in the U.S. for the first quarter of 2013 grew by more than 5% year-over-year to reach a value of $986 million. This is the first increase in demand since the third quarter of 2005, the World Gold Council said Thursday.

The lower-end of the U.S. jewelry market rebounded considerably, the WGC in its quarterly Gold Demand Trends report, adding that it’s “a further positive sign of recovery in the U.S. economy, coinciding with a correction in the gold price over the course of the quarter.”

Meanwhile, the amount of gold used for the fabrication of jewelry worldwide increased by 12% year-over-year to 551 metric tons for the first quarter of 2013, worth a record value of $28.9 billion, according to the report.

The dramatic decline in the value of gold has led to an increase in demand, the WGC said in the report. However, that demand is largely limited to India and China, who continue to distance themselves from the rest of the world in their passion for gold jewelry. The two countries combined now account for 62% of gold jewelry demand, according to the report. The U.S. for the first time in more seven years saw a year-over-year increase in gold jewelry demand.

Other highlights of the report include:

* Gold jewelry demand surged by 19% in China to a record level, led by Chinese New Year gifting in January and a rebound in consumer sentiment, WGC said. This is despite new in leadership in China calling for less conspicuous consumption. Demand saw the largest increase in 24k gold jewelry, although demand for 18k gold jewelry also increased.

* In India, year-over-year demand grew by 15% and came just short of beating the fourth quarter 2012 record. However, that gain was compared a very soft first quarter of 2012.

* Meanwhile, gold jewelry demand in Italy and the U.K. fell dramatically, 12% and 7%, respectively, as difficult economic continues continue to lead consumers to purchase lower-karat gold and silver jewelry.

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Gold Jewelry Demand Up 18%, Total Demand Up 29%

The gold price rose for the tenth consecutive year in 2010 reaching $1,405.50 an ounce by the end of December on the London PM fix, a 29 percent increase from last year’s levels, the World Gold Council reports.

Last year’s price performance was driven by developments in key gold markets, WGC said in its Gold Investment Digest for the fourth quarter and full-year 2010. China saw increased investment activity, driven in part by innovative new gold investment vehicles offering improved access to the gold market. Globally, investors remained concerned about uncertainty in the macro-economic environment and turned to gold to hedge against weakness in the US dollar and rising inflation in many economies.

However, WGC noted that despite its high cost, global jewelry demand totaled 1,468 tons during the first nine months of 2010—a year-over-year increase of 18 percent. This includes a rebound in gold jewelry consumption in India, the world’s largest gold market.

In addition, gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19 percent increase over the same period in 2009.

“The gold story in 2010 is about growth in demand and not just economic concerns. It is significant that consumers increased their gold jewelry spending during the first nine months of last year, despite the rising price of gold,” said Juan Carlos Artigas, WGC Investment Research Manager. “Strong investment activity and a normalization of gold demand in technological applications during the same period further supported gold’s stellar appreciation.”

Complete full-year data for gold demand will be available in February when the WGC publishes its Gold Demand Trends report.

Gold Jewelry Demand Up 17% in 2010 led by India and Asia While Demand in U.S. and Europe Remains Sluggish

Annual demand for gold jewelry rose 17 percent to 2,059.6 tons as Asian consumers continue to drive jewelry demand, the World Gold Council reports. The rise in annual average prices over the same period was 26 percent.

In value terms, this resulted in record annual jewelry demand of $81 billion in 2010, according to the WGC’s quarterly Gold Demand Trends report, a 47 percent increase over 2009.

In India, 2010 was a record year as gold jewelry demand rose 69 percent to 745.7 tons. In local currency terms, Indian jewelry demand more than doubled for the year; boosted by a 20 percent rise in the rupee price of gold combined with a 69 percent increase in the volume of demand pushed up the value of gold demand by 101 percent.

“The rising price of gold, particularly in the latter half of the year, created a ‘virtuous circle’ of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up local prices,” WGC said in its report.

In China, 2010 saw annual gold jewelry demand increase 13 percent to 400 tons. The value measure of demand was more striking, rising 41 percent.


Meanwhile, In the U.S., the long term downtrend in demand for gold jewelry continued throughout 2010, although the pace of decline slowed somewhat, WGC said. Fourth quarter demand of 47 tons was 16 percent below year-earlier levels, translating to a decline of 14 percent on an annual basis. U.S. demand in value terms in 2010 rose by 8 percent to $5 billion.

European gold jewelry consumers, facing continued economic problems, were similarly discouraged by higher gold prices and tonnage demand declined accordingly in these markets, WGC said. Italian demand was 16 percent weaker year-on-year in 2010. Full-year demand in the UK was similarly weak, down 14 percent. On a value basis demand was slightly more robust. Annual demand in Italy was up 12 percent, while UK demand increased by 10 percent.

In Hong Kong, annual jewelry demand reached a 10-year high of 20.6 tons; while demand in Taiwan was less resilient to the higher gold price, resulting in a jewelry demand decline in 2010 of 7 percent, year-over-year.

Gold jewelry demand throughout the rest of the Asian region was weaker relative to 2009 levels as consumers were deterred by soaring gold prices. All markets recorded double digit year-on-year losses, both in the fourth quarter and 2010 as a whole. In Indonesia, Japan, Thailand and South Korea, consumers shifted to lower carat and/or gem-set product and, in some cases, branded silver. In Indonesia in particular, average purity of gold jewelry suffered a notable decline, WGC said.

The one exception was Vietnam, where 2010 demand of 14.4 tons was just 5 percent down on 2009. “When considered in the context of a 30 percent increase in domestic gold prices over the same period, 2010 demand can be considered robust,” WGC said.

The value of annual demand in Japan held steady at 2009 levels, WGC said.

Consumers across the Middle East region responded to high and volatile gold prices in the fourth quarter by cutting back on their demand for gold jewelry. 2010 full year demand was between 6 percent 10 percent below 2009 levels for each of these markets.

In Turkey, 2010 annual demand holding broadly steady at 2009 levels. However, the comparisons are being made with exceptionally weak 2009 numbers, WGC said. By value, jewelry demand, 2010 demand increased by 20 percent, year-over-year. “However, in a historical context, this is still well below the levels of two-three years ago, WGC said.

Russian gold jewelry demand grew 12 percent in 2010, to 67.5 tons.

Overall, the WGC said annual demand of all gold usage (including as an investment and its use in manufacturing and technology) increased 9 percent to 3,812.2 tons, which was worth approximately $150 billion.

“This performance was mainly attributable to strong growth in jewelry demand, the revival of the Indian market and strong momentum in Chinese gold demand and a paradigm shift in the official sector, where central banks became net purchasers of gold for the first time in 21 years. The WGC expects total gold demand to remain resilient across jewelry, investment and technology sectors over the coming quarter.”

2013 Gold Jewelry Demand Up 17%

Marco Bicego 18k gold bracelet

Gold jewelry demand in 2013 saw the largest volume increase in 16 years as consumers across the globe reacted to lower gold prices, the World Gold Council said Tuesday. Full year demand was 2,209.5 tons, 17 percent above 2012 levels.

In addition, the fourth quarter of 2013 was the sixth consecutive quarter of year-over-year growth with demand of 553.8 tons, 12 percent above the five-year quarterly average, the WGC said in its market report, Gold Demand Trends: Full year 2013 Review. Jewelry consumption saw continuous growth throughout 2013, with the bulk of the increase coming in the first half of the year due to China and other Asian countries whose consumers responded quickly when the price first dropped. However, even during the second half of the year, the volume of demand continued, increasing by 7 percent year-over-year.

Also in the fourth quarter, the US and the UK generated a combined 14 tons of this growth. “Although the fourth quarter is traditionally strongest in these markets, due to the Christmas effect, these numbers are significant given their size and direction – the first year-on-year increase in Q4 demand in both markets since 2001,” WGC said in its report.

In addition to jewelry, the WGC report measures gold consumption in technology, investment and central bank purchases. The value of overall annual jewelry demand fell 28 percent in 2013 from its record highs a year earlier. However, in terms of jewelry demand, the value fell less than 2 percent, showing its strength in volume terms. 

New gold jewelry consumption records were set in India, China and Turkey in 2013. Even Japan, with its struggling economy recorded the highest value for the precious metal since 2008.  

“A longer term perspective shows that an increasing share of global collective wealth has been allocated to gold jewelry since 2003 (with the exception of 2009, during the worst of
the financial crisis),” the WGC said in its report. “In 2013, gold jewelry value was almost 0.14 percent of global GDP compared with less than 0.08 percent ten years previously. Significantly, jewelry share of global GDP in 2013 was one fifth higher than 1997, which was the
peak year for gold jewelry demand in tonnage.”

The year 2013 was also notable because of the increasing preference for higher-karat jewelry, particularly in China (24k jewelry). “This trend became more entrenched as the year progressed, benefitting from the quasi-investment element to jewelry purchases, particularly as the upsurge in demand in Q2 and Q3 led to a shortage of retail investment products.”

In the US, where the top end segment has been relatively robust, this trend was more noticeable at the lower end of the market, with mass retail brands shifting away from ultra-low carat items to increasing their stock of 14k jewelry.

Fourth Quarter Jewelry Trends
“Fourth quarter jewelry demand across eastern markets was likely tempered by the magnitude of buying in previous quarters, which on account of falling prices, had ‘cannibalized’ a proportion of future demand,” the WGC said. “In addition, expectations that prices had stabilized released the pressure on consumers who no longer felt they had to make purchases immediately to take advantage of lower prices.”

India - Fourth quarter jewelry demand fell 2 percent year-over-year to 150.7 tons. “The second half of the year was considerably weaker than the exceptional first half, equating to a robust full year total for the sector.”

China and Hong Kong – The WGC is calling the fourth quarter a slowdown from the record numbers during the first half of the year (with the exception of December leading to Chinese New Year), but demand still increased 10 percent to 150.7 tons for Mainland China for the period. In Hong Kong the growth was even greater at 17 percent to 7.9 tons.

Other Asian Markets – China’s pattern was replicated across the other Asian and Middle Eastern markets with strong demand during the first half of the year, tapering off in October as the drop in gold prices stabilized with growth in December. Fourth quarter results are as follows: Taiwan up 2 percent; Indonesia, up 28 percent; South Korea down 7 percent; Thailand up 17 percent; and Vietnam up 9 percent. 

Turkey – The gold jewelry manufacturing center also saw a similar pattern of demand but for different reasons, the WGC said. A strike at the mint between July and September led to a shortage of coins in the market, leading consumers to stock up on gold jewelry. However, once the strike was settled in the fourth quarter consumers went back to gold coins, at the expense of jewelry.

Japan – Its 11 percent growth in the fourth quarter was the exception to the regional trend of strong start and weaker finish to 2013, the WGC said. This was because of encouraging economic news and the anticipation of a sales tax increase from 5 to 8 percent in April, leading consumers to make pre-emptive purchases, where possible, to avoid paying the higher rate.

US and UK – Demand among US and UK consumers led to fourth quarter growth at 21 and 26 percent respectively. As mentioned previously, gold jewelry sales accelerated in the latter months of the year. 

Italy – Demand in this jewelry manufacturing center continued its downward trend falling by 10 percent in the fourth quarter. 

Russia – Jewelry demand reached a five-year high in the fourth quarter (up 6 percent), fueled by continued expansion of the middle class, with growth being concentrated in the second half of the year. 

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