U.S. Gold Jewelry Demand Down 13%

Worldwide gold demand for jewelry increased 6 percent in tonnage terms and 16 percent in dollars in the third quarter, according to the World Gold Council. The rise in gold jewelry demand in Asia, the Middle East, and Russia offset declines in the United States and parts of Europe.

U.S. gold jewelry demand fell by 13 percent in the third quarter from year-earlier levels due to the impact of the high gold price and a slowing economy, WGC said in its “Gold Demand Trends,” released Thursday. However, high- and mid-market demand for gold jewelry remained brisk.

The report says that a change in demand patterns became evident during the third quarter as investors rather than jewelry buyers became the dominant force. At 138 tons, investment in Exchange Traded Funds and similar products were at a quarterly record. Total gold demand for the quarter reached a record 20.7 billion, up 30 percent year-over-year.

“It is clear that gold’s safe haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and a falling dollar,” said James Burton, WGC chief executive officer. “Looking forward, we believe that investor interest will remain very strong in the near future and that, as the price stabilizes, major gold jewelry buying nations, such as India, China and the Middle East, will quickly adapt to a higher floor in the price.”

The figures were compiled independently for WGC by GFMS Ltd.

Demand in India was 5 percent higher in tonnage terms in the third quarter, year-over-year, a slowdown from the rapid pace in the first half of the year, WGC said. Demand was very strong in the first two months but then faded as the price started to climb in September, impacting on demand for gold in the run up to Diwali.

By way of contrast, there was no slowdown in demand in Mainland China where the quarter brought a further 25 percent increase in demand, year-over-year. The rise in the price in September was evidently less of a deterrent to Chinese buyers.

Demand remained strong throughout the Middle East, increasing by 19 percent in Saudi Arabia, 10 percent in United Arab Emirates, 15 percent in Egypt and 3 percent in other Gulf countries combined. Strong economies in the Arabian Peninsula and a recovering economy in Egypt, together with the favorable price environment for jewelry buying in the first two months of the quarter, easily outweighed the negative impact of the price rise in September.

In Turkey, an all-time record demand at 86.3 tons was reached in the third quarter, WGC said. Net retail investment was a third quarter record, while gold jewelry demand for the quarter was the second highest quarter ever. A combination of increased purchasing power, an appreciation of the lira against the dollar helping to keep local prices stable, and political tensions all supported demand.

In Russia, jewelry demand continued to soar rising to 22.4 tons in the quarter to 23 percent, higher than a year earlier. Rising consumer incomes and a rapidly improving retail environment are both key factors.

In Italy, a combination of high gold prices and a weak economy caused a further fall in jewelry demand, WGC said.

Demand was also slightly down in the United Kingdom, year-over-year.

Gold supply was 16 percent higher than a year earlier at 1,045 tons, WGC said. This sharp rise was primarily caused by reduction in mining company de-hedging and higher central bank sales, and not by a rise in mine output.