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Tuesday, February 18, 2014

2013 Gold Jewelry Demand Up 17%

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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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