Although the World Gold Council’s Gold Demand Trends: First quarter 2014 report described the three per cent increase in gold jewellery demand to 570.7 tonnes as “modest growth”, it also stated that this was the largest recorded first quarter volume since 2005.
This boost in demand was primarily attributed to lower gold prices; the average price in United States dollars was 21 per cent lower than in the previous year.
The drop in gold price was echoed in other markets with European and Chinese consumers said to have particularly benefited from a similar lower-price environment. The strengthening economic situation was also noted as a contributing factor.
In value terms, gold jewellery demand equated to US$23.7 billion (AU$25.7 b), an 18 per cent decrease from the first quarter of 2013. This was reportedly largely due to the fact that the previous corresponding period’s value of US$29.1 billion (AU$31.5 b) was the third highest on record.
When compared with the five-year quarterly average value of US$22.7 billion (AU$24.6 b), the first quarter gold jewellery value was actually up five per cent.
Widespread increase in demand
The report described, “a continuation of momentum in the jewellery markets, with demand following traditional patterns” in the first quarter. Increased gold jewellery demand was widely reported across all regions with only a few exceptions.
The largest year-on-year volume increase of all the regions analysed was achieved in China, which reported a 10 per cent rise in gold jewellery demand.
The results follow a trend also experienced in previous years with reported strong fourth quarter 2013 consumer demand and stock-building, in preparation for the Chinese New Year and Valentine’s Day, carrying through to January, before subsiding quite abruptly once the holiday period had finished.
This pattern was observed throughout South East Asia, particularly in Indonesia and Vietnam with respective demand increases of nine per cent and three per cent. However, demand in Thailand dropped by 17 per cent compared with the previous year.
Demand in the United States and United Kingdom continued to improve as a result of better economic conditions and lower average gold prices. US consumer purchases shifted from plated jewellery towards higher carat items, resulting in a demand increase of five per cent.
In the UK, consumers responded positively to lower gold prices, which was further amplified by the strengthening pound.
Gold jewellery demand was also up across the Middle Eastern region; the United Arab Emirates reported its highest quarterly demand total since 2008 with 22.1 tonnes and Egypt experienced a six per cent increase in demand, predominantly in the high-carat investment-proxy segment. The report stated though that demand in this region, “continues to suffer as a result of the ongoing political tensions, remaining well below pre-Arab spring levels”.
Political climate impacts on demandNot all markets experienced growth in the first quarter, and political instability took its toll on gold jewellery demand in a number of countries.
India’s nine per cent fall in demand to 145.6 tonnes was said to be due to ongoing restrictions on gold imports and the atmosphere of uncertainty that had been created as a result of the country’s governmental elections. Despite this, the report noted, “We continue to view India as a source of strong latent demand, which will be unleashed as and when the government restrictions on gold are eased.”
Gold jewellery demand in Turkey also suffered from political controversy following accusations of government corruption. The depreciation of currency and the resulting spike in gold price were also factors in the 12 per cent drop in demand.
Meanwhile, the continued economic slowdown in Russia, combined with the further depreciation of the rouble and an outbreak of geopolitical tensions resulted in a three per cent decrease in gold jewellery demand compared to 2013.
Australian gold jewellery demand was not specifically mentioned in the report.
It was noted that although first quarter results had been largely positive for gold jewellery, second quarter comparisons were expected to be “significantly weaker”.
“Much of the demand surge last year occurred in response to the price drops in April and May, thereby pushing Q2 demand far beyond ‘normal’ ranges,” the report stated. “We would expect jewellery demand next quarter to come more into line with longer-term average levels.”
In addition to jewellery, the study analysed the following categories: investment, central banks, technology and supply.
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