Chinese Gold Jewelry Demand Drops for the First Time in 8 Years

LONDON (Scrap Monster): During the second quarter, demand for Chinese gold jewelry has found to be reduced for the first time in eight years and estimated that it would drop as much as 20 pct in the full year, said a leading precious metal consultancy.

The considerable fall in Chinese demand will affect the gold prices, which is already under pressure due to improving global economy and the withdrawal of U.S. stimulus. Gold fabrication rate also went down by 40-60 pct in China during the second quarter.

Hike in gold prices and weak Yuan made the demands to decline and fresh purchase also get affected by the record purchases of last year. Jewelry demand is the major driving factor for Chinese gold consumption and it showed a considerable drop down during the period April-June period. This is the first year-on-year drop since the Q2 2006.

Thomson Reuters GFMS analyst Sara Zhao said that consumers had become more rational on gold purchases. She added that unless there was a significant turnaround in the second half, the demand would fall well short of the record levels achieved in 2013.

The second quarter demand drop is very high when compared to the huge purchases in the Q2 last year, when the prices where comparatively low. Last year, gold prices dropped 28 pct after the bullish 12 years.

One dealer from Hong Kong said that the customers were expecting the prices to fall further and come back if the prices get decreased to below $1,200 per ounce. This year, gold has surged about 7 pct, however the strong gains of the Q1 have declined as the year has worn on.

Price of Gold at present is just below $1,300.