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Lower prices, robust demand in China and economic recoveries in countries like the US and UK have all led to a 3 percent increase, year-over-year, of gold jewelry purchased worldwide to 570.7 tons, the largest first quarter volume since 2005.
Consumers across the globe (with notable exceptions) took advantage of a year-over-year 21 percent drop in the price of the precious metal, according to the World Gold Council’s Gold Demand Trends quarterly report. Meanwhile, demand in value terms for the first quarter fell 18 percent year-over-year to $23.7 billion, largely a function of the first quarter 2013 value of gold being the third highest on record.
The modest growth increase in gold jewelry demand made up for declines in all other gold sectors (technology and investment) tracked by the WGC report. Overall gold demand in the first quarter was flat year-over-year at 1,074.5 tons. The value of demand declined 21 percent year-over-year to $44.7 billion due to the impact of lower gold prices.
Geographically, increases in demand were “reasonably widespread,” the WGC said.
Asia
China continues to lead the rest of the world in gold jewelry demand with a 10 percent growth in volume to 203.2 tons, accounting for more than 35 percent of worldwide jewelry demand. The WGC credits the seasonal impact of Chinese New Year being closely followed by Valentine’s Day, and the strong gold buying and gifting traditions associated with those two occasions, along with the nation’s “pro-gold culture” and rising incomes. Demand tailed off once the festive occasions were over.
New Year seasonal affects and lower pricing were also present in a number of markets in the Southeast Asia, notably Indonesia and Vietnam where demand increased by 9 percent and 3 percent, respectively. Thailand was the exception with a year-on-year decline of 17 percent.
The most notable decline at the country level was in India, one of the world’s largest gold markets, with a 9 percent drop in jewelry demand to 145.6 tons due to ongoing restrictions to gold imports as well as cash and gold restrictions for India’s consumers as a result of anti-corruption measures during the country’s governmental elections. “These created an atmosphere of uncertainty, particularly with respect to the import curbs and whether these may be lifted for the second half of the year, which left many consumers reluctant to buy until a clear post-election picture emerges,” the WGC said in its report. “While these were intended to prevent electoral corruption, they also had the effect of dampening down genuine cash purchases of gold.… We continue to view India as a source of strong latent demand, which will be unleashed as and when the government restrictions on gold are eased.”
US and UK
Consumers in the US and the UK responded positively to lower gold prices and continued economic recovery. US jewelry demand increased 5 percent to 19.1 tons. Severe weather conditions in January affected demand but the slack was made up in February and March as “consumers shifted from plated jewelry towards higher carat items, encouraged by retailers dedicating more shelf space to gold jewelry.” The increase also reflected stock replenishment after stronger than expected Christmas sales.
In the UK, the lower gold price, the strength of the British pound and signs of economic recovery led to a 29 percent gain in gold jewelry demand to 3.5 tons.
Middle East
Gold jewelry demand in the United Arab Emirates increased 18 percent to 22.1 tons, making it the highest quarterly total since the record third quarter of 2008, the WGC said. Jewelry demand strengthened across the Middle Eastern region as a whole.
Egypt saw growth of 6 percent to 12.8 tons, “predominantly in the high-carat investment-proxy segment.” Even with the strong showing, demand in Egypt “continues to suffer as a result of the ongoing political tensions,” the WGC said.
In Turkey gold jewelry demand declined 12 percent to 14.5 tons. Currency depreciation resulted in a sharp rise in local gold prices during the quarter, which deterred jewelry buyers. The decline was further exacerbated by political controversy, with the ruling party facing corruption allegations.
Russia
In Russia, continued economic slowdown, combined with further depreciation of the rouble and an outbreak of geopolitical tensions, led to a 2 percent year-over-year decline in Russian jewelry demand to 17 tons. This ended 12 quarters of expansion in this market “as consumers were more focused on accumulating savings to combat the environment of uncertainty and instability,” the WGC said.
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