Rising gold prices may not dent jewelry consumption in 2011

Gold  |  2011-03-08 09:52:35   |   By

Asian jewelry consumption will continue to remain strong while UK trends also are positive but US, Middle East markets

LONDON (Scrap Monster): Will the weaker trend in gold jewelry demand growth in 2010 continue into 201due to the all time record price of $1440 per ounce acheived in early March? Gold prices continue to trade around the record levels thanks to its safe haven demand that remains intact on global political tensions and inflationary pressures.

Gold jewelry constitutes the largest segement of gold demand and in 2010 it rose 17% to 2059.6 tonnes from 1760.3 tonnes in 2009. However, it was the Asian markets which provided support to gold jewelry while United States jewelry sales dipped 14 percent, while in Italy it dropped 16 percent and the Middle East, where it dipped 7 percent.

In United Kingdom, the retail sales of jewelry and watches grew by only 1.8% to be worrth 4.64 bn. 'The recent upturn in the market in 2009 and 2010 after 2 years of negative growth is attributable to a slight recovery in the economy and consumers investing back into the luxury market. Certain sectors of the market have seen different growth rates over the last 12 months, in particular the watches sector, which alone increased by 8.5% in 2009. Trends imply that, although consumers have started investing in the jewellery market, there is much division between the sectors, with the actual sales of real jewellery having experienced a small increase in terms of value, while cheaper fashion alternatives have seen a high rise in sales. Overall, the trends indicate that, despite the fact consumers have started spending in the industry, they are still conscious of prices, often opting for cheaper alternatives to real jewellery,' according to a new report titled 'Jewelry & Watches Market Report 2011' released by Researchandmarkets.com

'The significant increase in the price of gold over recent years has also affected sales in the UK market, with the higher cost creating problems for both consumers and retailers. However, a positive trend in the jewellery market has been attributed to the contribution the wedding market is making to sales in the jewellery industry. It has been reported that, despite the economic climate, most couples are unwilling to compromise on the quality of wedding bands and engagements rings. The wedding market has also widened over recent years, with bridal jewellery and gifts becoming common items for a wedding. Despite this, figures still imply that fewer people are getting married, which will put some decline on the industry overall in the long run,' the report added.

The market for jewellery and watches in the UK is expected to see continual growth as the economy continues to recover, with consumers becoming more spontaneous with their spending, as seen before the recession. Key Note forecasts that sales of jewellery and watches will continue to grow in the next 5 years, with sales peaking at 5.32bn in 2015, Researchandmarkets.com report added.

Gold demand in 2010 reached a 10 year high of 3,812.2 tonnes. Demand was up 9% year-on-year, and marginally above the previous peak of 2008 despite a 40% increase in the annual average price level between 2008 and 2010. In value terms, total annual gold demand surged 38% to a record of US$150 billion, according to World Gold Council.

According to analysts, the jewelry demand in developed markets would depend on economic outlook while there is an insatiable demand for jewelry in Asian nations including China and India thanks to higher economic growth and rising disposable incomes. In 2010, demand was particularly strong in the largest gold market, with demand up 69 percent to 745.7 tonnes.