China leads global drop in gold jewellery demand

Chow Tai Fook jewellery launch in April 2014 The global demand for gold jewellery was 2153 tonnes last year – 10 per cent less than…

Chow Tai Fook jewellery launch in April 2014

The global demand for gold jewellery was 2153 tonnes last year – 10 per cent less than in 2013 – according to the latest report from the World Gold Council. Although “year-on-year declines were widespread”, the WGC largely attributed the overall drop in jewellery demand to China “digesting the record breaking levels of jewellery accumulated in 2013” as its jewellery demand dropped 33 per cent to 623.5 tonnes.

The WGG said Chinese jewellery retailers “suffered” from the fall. For example, “in its interim report Chow Tai Fook noted that gold product sales by value declined 41 per cent in the period April to September compared to the same period in 2013”.

Other markets to record drops in gold jewellery demand included:
•    Japan – Demand dropped to an all-time low of 16.3 tonnes “as consumer sentiment, already ailing, was dealt a blow by the sharp fall in the value of the yen after the central bank unexpectedly expanded its monetary stimulus programme in the last quarter”.
•    Indonesia – The country recorded a 12 per cent decline due to “high inflation combined with political upheaval”.
•    The Middle East – The Middle Eastern markets combined jewellery demand dropped 8 percent from 2013 to 2014 with “a continued preference for 18-carat and lighter-weight pieces among the region’s consumers contributing to the decline”.
•    Russia – Having been fairly robust for much of the year, gold jewellery demand in Russia dropped sharply in the fourth quarter due to the “stratospheric rise in the gold price” resulting in a  4 per cent decline in the full year demand to 70.6 tonnes.

More positively, the report noted “a few markets were notable exceptions to the downward trend”: India’s demand for jewellery increased by eight per cent to 662 tonnes, its highest level of jewellery demand since records began in 1995 while the UK and US’s demand, driven by improved economic performance, were up 18 per cent to 28 tonnes and 9 per cent to 132 tonnes respectively.

Marcus Grubb, the managing director of Investment Strategy at the WGC, said that although the full year statistics show that gold jewellery demand fell by 10 per cent the figure was “comfortably above the 2053 tonne average from the prior five years”.

“After a steep drop in Q2, demand for gold jewellery gradually recovered, culminating in the strongest Q4 since 2007,” he said.
“It was also a standout year for Indian jewellery, despite government restrictions on gold imports, reinforcing the nation’s affinity with gold. Meanwhile Chinese gold demand returned to those last seen in 2011/2012 as consumers and investors took time to digest the substantial volumes accumulated in 2013.”

Grubb added that 2014 was a year of stabilisation and innovation in the overall gold market ( not just jewellery market) with annual gold demand down by just 4 per cent to 3924 tonnes after the record-breaking level of buying seen in 2013.

“What’s particularly notable about 2014 is that the striking shift in physical gold demand from West to East is now being followed by gold infrastructure development in Asia.

“New products and trading platforms were introduced like the Shanghai Gold Exchange International Board, the “Gold Send” mobile app in Turkey and the new kilobar contracts in Singapore and Hong Kong – all designed to make gold more accessible to greater numbers of buyers in the East.”
Based in the UK, with operations in India, the Far East, Europe and the US, the WGC is the market development organisation for the gold industry whose members include the world’s leading gold mining companies.

Further reading: