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Friday, August 15, 2014

Global Gold Jewelry demand Fell 30% While Sales in the US and UK Improve

Yellow and white gold bracelets by Italian jewelry brand, Antonini. There was increase in Italian gold jewelry exports for the second quarter of 2014. 

Plummeting gold jewelry sales in India and China led to a 30 percent year-over-year drop in gold jewelry demand for the second quarter of 2014, the World Gold Council said Thursday. The loss was slightly offset by increases in consumer demand in the US and UK. 

Gold jewelry demand fell to 509.6 tons in the second quarter of 2014 compared with 726.7 tons in the same period of 2012, the WGC said in its quarterly report, “Gold Demand Trends.” Officials for the gold industry market development organization said the decline was expected due to the strength of 2013 demand and a natural annual weak period for such demand. In addition, the organization (which also tracks gold demand in investment, among central banks and for technology uses) notes that jewelry demand historically has accounted for more than half of global gold demand and the second quarter of 2014 was no different at 53 percent. 

“In what is traditionally a quiet quarter for gold jewelry demand, Q2 2014, was unsurprisingly lower,” said Marcus Grubb, WGC managing director of Investment Strategy, said in a video addressing the report. “However, jewelry has been extending its broad upward trend from the base established in the depths of the financial crisis in early 2009.”

Nearly all Asian and Middle-Eastern countries experienced double digit declines in demand, while western markets either remained flat or fared better, according to the report. The exception is Italy, where consumer demand was down 8 percent. However, the country, known as a gold jewelry manufacturing hub, saw gold jewelry exports improve due to increased demand in the US and other key markets.

This decline in gold jewelry demand helped to influence a 16 percent drop in overall gold demand (investment, central banks and technology) to 963.8 tons, which the WGC described as “not surprising … given the stark contrast in conditions in the global gold market between the two time periods.” 

Grubb added, “Global gold market continues to recalibrate in 2014 following an exceptional 2013 for gold buying.” 

By country, China was the market most affected by the comparison with the second quarter of 2013, WGC said. Gold jewelry demand fell 45 percent to 143.4 tons. Hong Kong also experienced a similar decline (52 percent to 9.1 tons) due to a drop in mainland China consumers.

“The second quarter began as the first had ended, with consumers adopting a more cautious, considered and ‘occasion driven’ approach to gold jewelry buying,” according to the report. 

Grubb added, “Price sensitive consumers … held back from purchasing more due to uncertainty around the future direction of the gold price and the fact that purchases have been made in 2013 instead.” 

In India, jewelry demand fell by 18 percent to 154.5 tons. The WGC said holiday and wedding purchases remained steady but the drop was primarily because of the recent general election that culminated in the victory of Narendra Damodardas Modi who took office as India’s 15th prime minister in May. High value purchases were restricted by the previous government in the run up to the election, the WGC explained. Now consumers are waiting to see whether Modi will remove those restrictions.

“Consumers held back from buying on the expectation that restrictions on gold would be relaxed by the new government,” Grubb said. “No substantial changes have been made by the Indian government to date.”

In the Middle East gold demand saw a 25 percent decline to 47 tons. The WGC says the escalation of violence in Iraq had a “deleterious impact” on demand across the region. In addition, demand slowed ahead of Ramadan. “Nevertheless, the region as a whole remains relatively healthy, particularly as non-resident Indians provide a steady source of demand for the 22k segment.” 

While the east and Middle East markets are in decline, western markets are continuing to rebound from the 2008-09 recession, with the most notable increases in the US and UK. 

Gold jewelry demand in the US for the second quarter increased 15 percent to 26.1 tons as the country is taking in more imports from India, China and Italy. It was the country’s fifth consecutive quarter of year-over-year growth. In the UK, demand increased 21 percent to 3.6 tons. 

Gold jewelry demand in other key markets is as follows:

* In Turkey, demand fell 20 percent year-over-year due to a clampdown on credit card purchases and ongoing political turmoil, WGC said. The lower end market took the brunt of the decline while larger, more established brands were “relatively resilient.” 

* Thailand experienced a 60 percent decline in demand due to recent political instability and high comparisons to the second quarter of 2013, the WGC said.

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