Global gold jewellery fabrication is expected to continue to grow in 2018, with the projected total up 2% to a 3-year high, consultancy Metals Focus (MF) has said while releasing its annual publication Gold Focus 2018 today.

The growth is expected notwithstanding the fact that the price of gold could rise during the second half and potentially test US$ 1,450 before the end of this year.

The deterrent effect of higher gold prices as far as jewellery consumption is concerned will be balanced by growth in large markets such as China and India, with both benefiting from a benign economic backdrop and positive price expectations, the report stated.

Western consumption is expected to grow modestly, which should assist fabrication in export-led countries such as Italy and Turkey, the consultancy added.

However, gains in China will be restrained by the ongoing shift in consumer preferences. In India, while the market willl have to contend with the negative fallout of the recent banking fraud, robust income growth in rural areas should lead to consumption gains of 5%, taking total fabrication demand to 602t, a three-year high.

By contrast, fabrication demand in the Middle East is expected to weaken, as tax changes and low oil prices continue to weigh on consumer confidence.

The consultancy’s flagship annual report on the gold market, which was launched today at four simultaneous events in London, Toronto, Dubai and Mumbai also projects that gold prices will benefit from investor rotation into gold due to equity market corrections and other headwinds that will create “market conditions... positive for the metal as the year progresses”.

Nikos Kavalis, Director of Metals Focus, commented, “Our view that prices will rise is based on our belief that the dollar will resume its secular downtrend. Real short-term rates will also stay negative for some time to come... (and) twin deficits in the US [fiscal and trade] will lower investor appetite for bonds.”

The consultancy emphasised that though global economic growth is “broadly optimistic”, in the medium term, “the consensus is too exuberant”. It said it believes that periods of global market turmoil will continue to emerge, accompanied by spikes in volatility, pushing the prices to US$ 1,450 by the year end.