Nov 13, 2014

Global Gold Demand Remains Flat in Q3, Long-term Health of Jewellery Market Good

Global demand for gold remained relatively flat in the quarter ended September 30, 2014 registering a 2% decline over the comparative period last year at 929.3 tonnes (t) as gold prices remained relatively stable too, according to the just released report of World Gold Council (WGC) entitled Gold Demand Trends Thrid Quarter 2014.

The overall flat performance was reflective of a 4% decline in jewellery demand year-on-year with 534.2 t of gold jewellery being consumed around the globe.  Net investment demand was up 6% at 204.4 t while technology demand eroded to 97.9 t and central banks were net purchasers of 92.8 t.

WGC, however, cautioned that the decline in jewellery demand must be seen in the context of Q3 2013 being the strongest third quarter for jewellery demand since 2008 by a fair margin. It said that Q3 demand was marginally stronger than the 5-year quarterly average of 527.6t, while year-to-date volumes continue to extend the broad uptrend from the low seen in 2009. Year-to-date demand exceeds 2011 and 2012 by 5% and 12% respectively, building on the upturn from the 2009 lows.

Demand was strongest in India, where there was a 60% increase over Q3 2013 to 182.9 t. While this was the second highest Q3 total in recent years, the steep increase is a reflection of last year’s slackening of demand following duty hikes and import curbs imposed by the government.

Though jewellery demand in China was down 39% year-on-year at 157.1 t, this was broadly in line with both Q3 2012 and the 5-year quarterly average (of 148.2t and 154.9t respectively); the sharp fall being a result of last year’s exceptional rapid expansion. In terms of consumer preferences, 18-karat (K-gold) jewellery was relatively more robust than the 24-karat (chuk kam) segment.

While the Middle East saw a 14% drop to 36 t, Turkey was at its lowest Q3 ever with demand of only 19.2 t.

On the other hand both the US and UK markets saw continued growth in demand. The US imported greater volumes of gold jewellery from India, China, Italy, Mexico and Oman, with the first two countries acounting for 6 t each.

The WGC describes the third quarter growth in the US market as “an extension of the trend that has prevailed since early last year. Mounting conviction in the economic recovery has boosted sentiment and whetted consumers’ appetite for discretionary purchases”. It adds that there have been higher sales of higher carat and non-wedding related items with lower prices driving demand.

In fact, the WGC notes that “subdued investment demand contributed to the relatively stable price environment  during the quarter – and vice versa”.