Gold is still trading at more than US$1,600 an ounce, a figure far too high to make a profit selling gold jewellery. But according to the latest World Gold Council report, a change in the price of the precious metal may be on the horizon.
Is it coming back sooner or later?
In the fourth quarter of 2012, gold for jewellery fabrication measured by value saw a 13 percent increase over 2012 in terms of value, primarily due to robust demand in India, the world’s largest consumer of the precious metal, according to the WGC’s quarterly report: Gold Demand Trends for the full year. This strong finish boosted the precious metal to a 3 percent rise in terms of value to US$102.4 billion.
However, it’s not time for gold jewellery manufacturers and retailers to celebrate. In terms of volume, gold jewellery demand fell 3 percent in 2012 to 1,908 tons. In addition, outside of India and a few other isolated areas, demand remains soft, particularly in the U.S. and Europe.
In the U.S., gold jewellery demand in 2012 fell 6 percent by volume to 108.4 tons and fell 2 percent by value to US$2.21 billion. In Europe it’s worse with Italy, one of the world’s most important gold jewellery manufacturing hubs, leading the decline, with demand by tonnage falling by 15 percent in 2012.
Even in China, which has been the economic backbone of the world during the global recession, demand has slowed. In terms of volume China’s increase in demand was 1 percent to 145.8 tons. In value, demand rose by 3 percent to $8.03 billion, according to the report. In the other Asian markets the sluggish trend is the same. China is the second largest gold jewellery market and China and India together now account for 56 percent of the gold being used for jewellery.
India had by far the largest increase in gold jewellery demand in 2012. By volume the increase was 35 percent to 153 tons and by value it was 37 percent to $8.47 billion, according to the report, adding that almost all of the gain came in the latter half of the year.
The other bright spots are Egypt with a 35 percent gain in gold jewellery demand by volume; and Russia (now the fourth largest market) where demand increased for the second straight year with the market expanded in volume by 7 percent in 2012 to 81.9 tons. Egypt’s gains still didn’t come close to the gold jewellery demand the country experienced prior to the 2011 political uprising, according to the report.
The good news is that overall global gold demand has softened. In addition, the U.S. dollar and the Euro are strengthening, which are also putting downward pressure on gold prices. If this trend continues, the comeback in gold jewellery may be likely. However, plenty of others have to go right as well.
