Aug 04, 2017

WGC: Global Gold Jewellery Demand Up 5% in H1 Driven by Year-on-Year Surge in India

Global demand for gold jewellery during the first six months of 2017 rose to 967.4 tonnes, up 5% over demand for the comparative period in 2016, the World Gold Council said in its publication Gold Demand Trends, released yesterday. The increase was due to a weak H1 2016, WGC said, pointing out that overall demand remained weak in a long-term context, falling below 1,000t for only the fourth time in the organisation’s data series.

Demand in the second quarter (Q2) rose 8% to 480.8 tonnes (H1 2016: 446.8 tonnes), though it remained well below the five-year quarterly average of 586.2t.

India was the main contributor to this increase, WGC stated, with demand spurting 41%, to 126.7t, largely due to extremely low Q2 2016 demand – just 89.8t.

The strong recovery in India had been widely expected, WGC said, being driven by the market stockpiling gold ahead of the subsequent 3% GST rate announcement, followed by another brief flurry at the end of June, before the actual rollout of GST in July; as well as being boosted by festivals, weddings and improved rural sentiment. For example, WGC believes that the Akshaya Tritiya-related sales (aided by the festival being on a weekend) were up by around 30% y-o-y.

WGC believes that the Indian market will be muted in the second half, becoming more settled towards the end of the year as it fully adapts to the GST.

In China, the other key market for gold jewellery, WGC reported that demand weakened again, but the pace of slowdown has moderated. Jewellery demand of 137.7t (down 5% y-o-y) was the lowest Q2 in China for five years. But the overall downward trend of the last three years has slowed so far in 2017: H1 demand was 4% below H1 2016.

The main trend in the market is a shift away from pure 24k gold to lower-carat, higher-designed and higher-margin gold jewellery, WGC said, adding that as the industry effectively targets key consumer segments, the market may start to bottom out following the steady decline from its 2013 peak.

While a dip in the local gold price in Turkey pushed jewellery demand up 20% y-o-y, regional jewellery demand was flat for the Middle East as a whole. Demand in Egypt dropped 20% y-o-y, hitting a new low of 4.7t, but Iran’s jewellery market gained further strength: Q2 demand rose by 15% to 10.2t and H1 demand was 20% higher at 22.9t – the highest first half total for four years.

In the US, Q2 tonnage was up 4% y-o-y at 26.9t, but still somewhat below the five-year quarterly average of 28.9t. Demand in the first half of 2017 has been lifted by improving consumer sentiment, resulting in H1 demand growing 4% to reach 49.9t - the highest first half total since H1’09. However, Q2 jewellery demand in Europe was weak: down 4% across the region.