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Thursday, February 12, 2015

10% Drop in 2014 Global Gold Jewelry Demand

This Indian woman who reportedly wore more than $600,000 worth of jewelry to her wedding may have helped India achieve an 8 percent gain in gold jewelry demand in 2014

Global gold jewelry demand fell 10 percent year-over-year in 2014 to nearly 2,153 tons as strong growth in India, the US and UK couldn’t offset declines in many other large gold markets, the World Gold Council said Thursday.

The WGC, in its quarterly Gold Demand Trends report for the fourth quarter and year-end 2014, says the decline was largely due to extremely strong comparisons to 2013. 

“2014 was always going to be a difficult year for jewelry demand, contending with comparisons to phenomenal strength in 2013,” WGC said in the report. “After a steep drop in Q2, demand for gold jewelry gradually recovered, culminating in the strongest Q4 since 2007.”

The report also notes that the year-end figure is “comfortably above” the 2,053 ton average for the the prior five-years. 

Despite the drop for 2014, year-over-year fourth quarter demand actually grew by 1 percent to 575 tons, again led by a surge in year-end demand in India, the US and the UK, according to the report. 

The report, which also tracks gold demand for technology, investment and central bank net purchases, says jewelry remains the biggest source of demand for gold, accounting for nearly 55 percent of total demand in 2014. 

Declines were reported in much of the world including nearly all of Asia, the Middle East, Russia and in gold manufacturing centers Turkey and Italy. 

The biggest surge in demand for 2014, by far, was in India—one of the two largest gold markets in the world. India had its strongest year for jewelry demand since the WGC began tracking demand in 1995, up 8 percent year-over-year to 662 tons. Wedding- and festival-related purchases drove fourth quarter demand up 19 percent and first-half 2014 up 37 percent, year-over-year. “The second half of the year was the strongest H2 in our data series (from 2000),” the WGC said in its report.

However, it should be noted that the results in India are being compared with extremely weak 2013 results, due to restrictions of gold imports and the decline in value of the local currency in 2013. 

The other largest gold jewelry market in the world, China, saw its 2014 demand fall by 33 percent year over year to 623.5 tons. Despite this, it was still the second best year for jewelry demand in the country since WGC records began. 

In the US, jewelry demand showed year-over-year growth for the seventh consecutive quarter. Its fourth quarter result of 54 tons was a 13 percent year-over-year increase and the strongest fourth quarter since 2009. The 2014 full year demand of 132.4 tons was a 9 percent year-over-year increase and the highest year-end total in five years. 

“That being said, it clearly has to be acknowledged that the market remains far below pre-crisis levels of jewelry demand, which between 2000 and 2006 averaged 360 tons per year,” WGC added.

In the UK, demand increased by 18 percent in 2014 to 27.6 tons. In the fourth quarter sales increased by 14 percent to 15.9 tons, led by the introduction of “Black Friday” sales events for the Christmas holiday season, the WGC said. 

“Lower carat gold jewelry took market share from silver and some interest in heavyweight plain gold chains was reported,” WGC said. 

In most other major gold jewelry markets, demand was down. 

The Asian region was generally weak, with smaller markets “affected by its own individual set of adverse economic circumstances that proved detrimental to jewelry demand,” WGC said in its report. Japanese demand for jewelry slid 8 percent in 2014 to an all-time low of 16.3 tons as the already ailing consumer sentiment “was dealt a blow by the sharp fall in the value of the yen after the central bank unexpectedly expanded its monetary stimulus program in the last quarter.” 

There was a 12 percent decline in demand in Indonesia, the largest of the non-Chinese Asian markets, due high inflation and political upheaval. Newly elected President Widodo announced the removal of gas subsidies in October, “which further choked disposal income.”

Vietnam bucked the trend with a 4 percent gain in 2014.

Other markets are as follows:

* Turkey, demand was down 7 percent to 68.2 tons. 

* Middle East, markets in this region lost a combined total of 8 percent in 2014 to 174.1 tons.

* Russia, gold jewelry demand in Russia dropped sharply in the fourth quarter, leading to a net decline of 4 percent to 70.6 tons for 2014. “The stratospheric rise in the gold price during the fourth quarter (as sanctions and sliding oil prices hit the domestic currency) proved too steep for many consumers.”

WGC says that Jewelry is by far the largest component of above-ground stocks of gold—accounting for almost half of the 177,200 tons of gold estimated to be held by private owners and central banks. 

The total global gold market in 2014 declined 4 percent to 3,923.7 tons, according to the report. The total global supply of gold was flat at 4,278.2 tons. 

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