Gold Jewelry Is Back In Demand

Gold jewelry demand in 2013 saw the largest volume increase since 1997 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. 

Global gold jewelry demand increased 6 percent to 553.8 tons for the fourth quarter of 2013. It was the sixth consecutive quarter of year-over-year growth with demand 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 primarily 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 gold jewelry 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 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.

2013 Gold Jewelry Demand Measured By Value

In addition to jewelry, the WGC report measures gold consumption in technology, investment and central bank purchases. The value of overall annual gold demand fell 28 percent in 2013 to $170.42 billion, from its record highs a year earlier.

However, in terms of value, jewelry demand fell less than 2 percent to $100.24 billion, revealing its strength in volume terms. In terms of value, gold jewelry consumption records were set in India, China and Turkey in 2013 based on local currencies, the WGC said.

Broad Appeal of Gold Jewelry in 2013

The year 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 high end market segment has been relatively robust, this trend was more noticeable at the lower end of the market, with mass retail brands shifting from ultra-low-karat items to increasing their stock of 14k jewelry, according to the report.

Fourth Quarter Jewelry Trends by Country

“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.” 

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 the 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. No reason was given for the differences within the individual countries.

Turkey –A strike at the Turkish mint between July and September caused 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. For the year, gold jewelry demand increased 8 percent to 7 tons.

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 to avoid paying the higher tax 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.

Original Source: http://www.forbes.com/sites/anthonydemarco/2014/02/18/gold-jewelry-is-back-in-demand/