WGC: Inflated gold prices choked jewellery demand in Q1 2017

SEATTLE (Scrap Monster): The World Gold Council (WGC) has published the latest Gold Demand Trends Report. The report highlighting gold trends in Q1 2017 notes that gold jewellery demand posted marginal growth during the quarter. According to WGC, the higher price of gold during the quarter has badly impacted the overall jewellery demand.

The Q1 gold jewellery demand totaled 480.9t, marginally higher by nearly 1% when matched with the demand of 474.4t during the corresponding quarter in 2016. The demand remained 18% lower than the five-year quarterly average of 587.7t. The dollar price of gold surged higher by nearly 9% during the initial three-month period of the year, which restrained demand in most consumer markets. India and China accounted for 56% of market during Q1. The broad weakness in global jewellery market was partially offset by increased demand from India. Apart from India, markets in the US and Iran posted gains.

The Indian jewellery demand had slumped to historic lows in 2016, as a result of drastic cut in rural spending following the surprise demonetization announcement by the country’s government. The market conditions improved during Q1 this year. However, the quarterly demand stood below 100t at 92.3t, significantly higher by 16% when compared with the demand of 79.8t during Q1 2016. Domestic gold prices in India which rose steeply during the opening weeks of 2017 cooled off during February and March, mainly on account of sharp appreciation of the rupee. The easing of restrictions on cash withdrawal from bank accounts by the RBI also led to increased rural spending towards the end of the quarter. WGC predicts India’s gold demand to remain robust in the near term. However, industry is concerned about the impacts of forthcoming Goods & Service Tax (GST) on gold purchases. A higher tax burden could dent gold demand further, noted WGC official.

The demand for gold jewellery in China was down 5% than the five-year quarterly average. The demand declined by 2% over the previous year from 179.2t in Q1 last year to 176.5t in Q1 2017. The gold jewellery demand started 2017 on a strong note with robust sales during the Lunar New Year, which happened to fall in January this year. However, demand dropped sharply after the end of season. The gold jewellery sale in the country was negatively affected by the slowdown in country’s economic growth and change in preferences in consumer spending, which in turn has forced jewellery makers to come up with innovations in design and make.

The other smaller Asian markets reported sharp drop in gold jewellery demand. The Japanese demand tumbled by 9% to 3.2t, mainly on account of drop in Chinese tourists who account for bulk of purchases. Thailand witnessed 5% decline in demand, largely due to its weak economic growth. The demand by the country totaled 3.1t during Q1 2017.

The Turkish gold jewellery demand plunged to a four-year low of 7.7t. The demand in the Middle East totaled 54.6t. The 27% jump in demand in Iran was offset by declines in other countries across the region. The UAE gold jewellery market continued to remain robust during the first quarter of the year. Elsewhere, the US demand rose 3% to 22.9t. The European demand remained subdued, mainly on weakness in the UK and French markets. The demand fell nearly 6% in France, WGC report noted.