After a 24 percent year-on-year drop in the first half of this year, global jewellery fabrication is expected to record a six percent year-on-year increase in the final half, according to GFMS’s Gold Survey 2008 update.
The precious metal consultancy’s report found that high and volatile gold prices were chiefly responsible for the decline, which saw the world total fall by 300 tonnes in the first six months of 2008 compared with the corresponding period in 2007.
“The most pronounced drop in jewellery (including the use of scrap) was seen in India, whose jewellery fabrication over the first six months effectively halved year-on-year. Elsewhere, substantial declines were recorded across much of the Middle East, with both Turkey and Saudi Arabia, the region’s two largest fabricators, seeing falls of around one-fifth.
In the US, one of the main jewellery consuming markets, the continued shift away from gold by retailers hit the country’s jewellery off-take. This also accounted for much of the weakness in Italian jewellery fabrication, whose ex-ports were further affected by the weakness in the US dollar.”
GFMS said that despite the overall decline there was some good news with China, Russia and Egypt all posting first half rises.
Looking ahead GFMS was cautiously optimistic.
The consultancy’s executive chairman, Philip Klapwijk, said the jewellery fabrication market had already experienced a “a sharp jump in third quarter demand” on the back of weaker prices, especially in some of the key price sensitive markets.
However, he warned problems could still emerge towards the year-end.
“We still expect prices to rally and this could bring an end to the recovery we have so far seen in the third quarter.”
He said the consultancy believes that the recent dollar recovery is an “ill-founded temporary phenomenon”.
Citing factors such as rising US unemployment, Klapwijk said he would not be surprised if the gold price went “back
over US$900”, but it was unlikely that gold’s record high of US$1011.25 would be broken this year.
“There was an element of ‘the perfect storm’ to the first quarter,” he said. “Not only did we see the slashing of US interest rates but there was also the surge in oil prices, falling equity markets and massive write-offs by the bank… And it’s difficult to see all that coming together in quite the same way in the next few months.”
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