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Friday, February 18, 2011

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.”