Lower Gold Prices Spark Gold Jewelry Demand

Demand for gold jewelry saw increases in volume that have not been seen since 1997

According to a World Gold Council (WGC) report released on Tuesday, the demand for gold jewelry saw the largest volume increase since 1997 in 2013. Full year demand was 2,209.5 tons, as consumers across the globe reacted to lower gold prices. That was 17% above 2012 levels, the WGC said in its market report, Gold Demand Trends: Full year 2013 Review. In the fourth quarter of 2013, demand for gold jewelry increased 6% globally to 553.8 tons. This was the sixth consecutive quarter that growth in demand was 12% above the five-year quarterly average on a year-over-year basis.

Although jewelry consumption growth was continuous throughout the year, most of the increase came in the first half of 2013 as Asian countries such as China’s consumers responded quickly to the price drop. During the second half of the year, however, demand continued, increasing by 7% year-over-year. Additionally, the United States and the United Kingdom generated a combined 14 tons of growth in the fourth quarter. “Although the fourth quarter is traditionally strongest in these markets, due to the Christmas effect, these numbers are significant given their size and direction – the first year-on-year increase in Q4 demand in both markets since 2001,” the WGC report stated.

The 2013 increase was significant due to the preference for higher-karat jewelry (24k jewelry), especially in China. “This trend became more entrenched as the year progressed, benefitting from the quasi-investment element to jewelry purchases, particularly as the upsurge in demand in Q2 and Q3 led to a shortage of retail investment products,” the WGC report said. In 2013, retail brands began shifting their stock from ultra-low-karat items to 14k jewelry, according to the report.

The slack off in Asian markets in the second half of 2013 was most likely due to a wait and see attitude. “Fourth quarter jewelry demand across eastern markets was likely tempered by the magnitude of buying in previous quarters, which on account of falling prices, had ‘cannibalized’ a proportion of future demand,” said the WGC. “In addition, expectations that prices had stabilized released the pressure on consumers who no longer felt they had to make purchases immediately to take advantage of lower prices.”

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