Global jewellery demand falls 15 % in second quarter – WGC
Global jewellery demand fell by 15% year-on-year to 418.3 tonnes in the second quarter of the current year, accounting for 42% of global gold demand.
The World Gold Council said in its Q2 2012 Gold Demands Trend report that the decline in the sector was largely due to a sharp fall in Indian jewellery demand as gold prices in local currency reached record highs. Demand for gold jewellery for the first half of 2012 totalled 906.4 tonnes, 13% down from H1 2011.
The value of Q2 2012 global jewellery demand was 9% below Q2 2011 levels at $21.6 billion. However, compared with the five-year quarterly average value of $18.5 billion, the value was up 17%.
Indian demand for gold jewellery declined 30% from 179.5 tonnes in Q2 2011 to 124.8 tonnes in Q2 2012 as a depreciation in the rupee against the US dollar resulted in local gold prices surging to record levels. Looking at the second quarter in a more historical context, demand was 14% below the 5-year average of 144.8 tonnes. In local currency terms the value of Indian jewellery demand was 10% down on the year-earlier period.
A number of factors combined to create an unsupportive environment for gold jewellery demand in India during the quarter. Slowing GDP growth; record high local gold prices caused by currency fluctuations; stubborn domestic inflation; high interest rates; and fears of a poor monsoon season all contributed to the year-on-year fall in demand.
Jewellery demand in China during the typically weaker second quarter dropped by 9% from year-earlier levels to 93.8 tonnes. The comparison with the historical five-year average of 103.1 tonnes shows a similar 9% decline. Chinese consumers were discouraged by the slowing of GDP growth during the second quarter as well as by the lack of a clear trend in the gold price. Chinese consumers prefer to buy into an established trend in the gold price and the period of consolidation during the second quarter therefore acted as a deterrent to gold jewellery demand.
Jewellery demand in Japan declined 7% from year-earlier levels to 3.8 tonnes as economic factors continued to dominate.
Among western markets, Russia was again the only country to generate growth in jewellery demand, albeit a marginal 2% increase.
The rate of decline in jewellery demand in the US slowed in the second quarter; demand was down 7% year-on-year compared with a 9% decline in Q1. Demand in value terms was virtually unchanged, 1% lower at $1 billion.
The decline was partially a result of the weak domestic economic situation combined with international economic unease. A continuation of the high unemployment rate and overall economic distress cut into non-essential purchases during the second quarter. Although demand among higherend consumers was slightly more robust, there were emerging concerns from this segment regarding the uncertainty around tax policy and regulations brought about by the upcoming elections.
Second quarter gold jewellery demand in both Italy and the UK was negatively impacted by economic factors. Italy’s troubled economic scenario, against the broader context of the ongoing eurozone crisis, led to a further decline in gold jewellery demand in that market.
An 8% year-on-year decline in UK gold jewellery demand translated into a 2% increase in value terms to £131.4mn. On a historical basis, demand was less than half the five-year average of 8.2 tonnes. The high-end of the UK market has proved the most resilient, with assay data showing that the weight of 24 carat items being hallmarked was up strongly during the second quarter, despite a reduction in the absolute number of articles being hallmarked. The data shows a strong increase in the number of 9 carat items hallmarked as key price points were met by items containing less gold.
In the light of these established trends and the unconstructive consumer environment, the prospects for both markets are for a continuation of the long-term decline.