Gold Jewelry Demand Up 17% in First Quarter

Spurred by strong economic growth in key markets and a less volatile gold price, coupled with sustained promotion, gold demand for jewelry was 17 percent higher than the weak first quarter of 2006 in tonnage terms and 38 percent higher in dollar terms, according to figures released by the World Gold Council on Wednesday. 
 
In general, the outlook for the second quarter “is looking very positive with good jewelry demand in most key markets,” WGC said. “The Akshaya Thritiya festival, originally considered an auspicious day for starting new ventures, investing, or buying in Southern India, but now promoted by WGC as a nationwide gold-buying occasion, was highly successful.”

Overall global demand for gold reached $17.4 billion, a 4 percent increase over the first quarter of 2006 in tonnage terms and a 22 percent increase in dollars terms, according to the WGC.

WGC said the major driver of this increased demand was China, or more specifically, the Chinese New Year, which was held in mid-February. Demand in the country was up 31 percent in the first quarter when compared to the prior year’s first quarter, led by people celebrating the “Year of the Golden Pig” by buying gold jewelry and commemorative “lucky balls,” WGC said.

Demand in the world’s largest gold market, India, also surged in the first quarter, rising 50 percent for the quarter. “Strong economic growth and the onset of the wedding season played a role here, but, more importantly, the development provided strong evidence of consumers’ comfort with gold prices above the $650 mark,” the WGC said. “Total consumer demand reached 211 tonnes, just six tonnes short of the previous first quarter peak in 2001, when gold was less than half the price it is now.”

Overall, the figures, compiled independently for WGC by GFMS Limited, show that global demand for gold has more than doubled in the past four years, WGC said.

Industrial demand was up 1 percent in the first quarter in tonnage terms and 18 percent up in dollar terms. Electronics demand, which grew strongly in 2006, recorded an additional 2 percent increase in tonnage compared to the prior year’s first quarter.

The long term outlook for industrial demand was given a boost by the recent announcement that Nanostellar Inc had devised a new nanoparticle coating, containing gold, for use in the diesel automotive catalytic converter market, WGC said.

Net retail investment for the period was 28 percent higher than the first quarter of 2006 in tonnage terms and 51 percent higher in dollar terms. However slower growth of exchange traded funds, compared to prior year resulted in total identifiable investment falling 26 percent in tonnage terms and 13 percent in dollar terms.

“Overall prospects for investment continue to be positive with a number of underlying political and economic factors well-aligned and an increasing number of gold investment vehicles available,” WGC said.

Gold supply remained tight during the quarter. A fall in scrap supply as consumers became accustomed to current prices and restrained from selling their jewelry, coupled with further de-hedging by mining companies, were the main reasons for a 2 percent fall from the already constrained figure for the first quarter of 2006. Net central bank selling was close to year earlier levels.

“This has been a very encouraging quarter,” said James Burton, WGC chief executive officer. “After a 2006 dominated by price volatility, the more stable start to 2007 has clearly encouraged more active jewellery buying, in line with our expectations.”