WGC Reports That U.S. Gold Jewelry Demand Up 3%, While Global Weakness Persists

Indian gold jewelry demand is making a comeback

Growth in U.S. gold jewelry demand resumed, leading to the strongest first quarter since 2010, the World Gold reported Thursday, as demand rose 3% year-over-year to 22.9 tons. The U.S. is firmly the world’s third largest market for gold jewelry.

The WGC Gold Demand Trends report for the first quarter of 2017 credited this growth to a post election lift in U.S. consumer sentiment. "Plain yellow gold was more popular in the U.S. than in European markets," WGC said in the report. "High end and online retailers performed strongly. The online segment is also gaining strength, particularly with continued growth in ‘clicks and mortar’ retailing—the overlap between the virtual and physical retail environments."

The U.S. was one of the few bright spots in a world still challenged by regional geopolitical and economic issues causing uncertainty throughout the world. More importantly, demand was curtailed by a 9% rise in gold prices from the end of December till the end of March.

A first-quarter surge in gold jewelry demand in Indian was enough to fuel a year-over-year 1% increase in global gold jewelry demand in the first quarter to 480.9 tons, according to the WGC. However, it is compared against an extremely poor first quarter of 2016. 

“Gold jewelry demand was broadly steady, but remains weak in the longer term context,” the WGC said in its report. “Demand was 18% below the 587.7-ton five-year quarterly average.”

India
In November 2016, the Indian government implemented a surprise demonetization policy that removed Rs15.44 trillion, or 86 percent, of the currency in circulation from India’s economy. This had an immediate devastating impact on the whole Indian economy, including the gold jewelry sector. It was the culmination of an extremely challenging year for India’s gold jewelry industry that included strikes, even more government regulations and high gold prices. All of this led to a seven-year low in gold jewelry demand in India in 2016. 

Against this backdrop a 16% year-over-year increase in gold jewelry demand to 92.3 tons in India in the first quarter of 2017, as reported by the WGC, isn’t as strong as it first appears. India’s importance in the gold jewelry marketplace can’t be underestimated. China and India accounted for nearly 56% of global gold jewelry demand in the first quarter. 

The WGC emphasized that despite the high quarterly gain gold jewelry demand remains weak, primarily due to the high cost of the precious metal. The good news is that “by the end of March, 85% of the value of currency removed from circulation under demonetization had been returned,” the WGC said in its report.

The WGC said the outlook in gold jewelry demand in India is “robust” with one caveat. “The market is wary of the forthcoming decision on GST (Goods and Services Tax— a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout India, with the exception of Jammu and Kashmir) and this will likely weigh on demand until the government’s final decision, due for implementation in early July.”

China
The massive, populous and increasingly upwardly mobile country is now easily the world’s largest market for gold jewelry. Demand for gold jewelry was down 2% year-over-year to 176.5 tons. 

An early Lunar New Year pushed gold jewelry demand in January, the WGC said. This was followed by a strong wedding season. However, “once the festivities were over, demand dropped off as usual—an effect that was more pronounced due to the backdrop of rising gold prices.”

The WGC described the gold jewelry industry as resourceful, but a slowing economic environment and changing consumer tastes are having a negative effect on gold jewelry demand. 

China, known for 24k gold jewelry, has experienced an increase in 18k products. Manufacturers responded by offering more intricate and contemporary designs. A new 22k segment was introduced to cater demand for new, innovative and trendsetting pieces. In addition, some retailers are increasingly becoming specialized in bridal jewelry. 

“So, although demand in China faces headwinds from the economy and the changing tastes of its consumers, the industry is keen and determined to adapt—an attitude that should help stem any weakness,” the WGC said.

Other Asian Markets
Jewelry demand within the smaller Asian markets was hit by a combination of rising gold price and rising political tensions in the region. In the face of rising gold prices, Japanese jewelry demand fell 9% year-over-year to 3.2 tons. A drop in Chinese tourists also was cited as a reason. 

In Thailand, sluggish economic growth contributed to a 5% decline in first quarter jewelry demand to 3.1 tons. “The government responded with several measures designed to boost the domestic industry,” WGC said. “These included waiving tariffs on raw material imports used in jewelry production , and making low interest loans available for small and medium sized businesses to upgrade machinery.”

Europe
Jewelry demand was again dragged down by weakness in France and the U.K., the WGC said. The rest of the region was stable. Demand fell 6% in France due to pre-election uncertainty and the rise in terrorist activity which has impacted tourism, the WGC said. In addition, branded silver is making continued inroads into market share.

The U.K. saw a 7% year-over-year first quarter decline to 3.7 tons. 

Middle East and Turkey
Demand in Turkey sank to a four-year low of 7.7 tons, the WGC said. Continued currency weakness in Turkey meant that the price of gold in lira rose more than in any other currency during the first quarter (+12%), undermining jewelry demand, which fell by 11% to 7.7 tons.

“The fragile economic and political conditions that have beset Turkey over recent years were again a key factor behind the weak Q1 number,” the WGC said. “The mid-April referendum on changing Turkey’s constitution from a parliamentary to a presidential republic weighed on demand for the sector. And the outlook for the market is weak as the local price remains prohibitively high for many at a time of deteriorating economic indicators.”

Demand in the Middle East was unchanged at 54.6 tons and it followed a familiar pattern, the WGC said. Jewelry demand in Iran jumped 27% in the first quarter year-over-year to a four-year high of 12.9 tons, helped by an improving economy and investment-driven purchases.

“Demand across the rest of the region remained weak in the face of low oil prices and subdued tourist numbers, the impact of which was exaggerated by rising gold prices,” the WGC said. “Although the UAE has imposed a 5% import duty, demand in that market was relatively robust as consumers rushed to buy before the full effect of the tax fed through to end user prices.”

Overall Gold Demand
The WGC Gold Demand Trends report—which tracks demand in gold for investments, jewelry and technology; and tracks gold supply as well—reported that overall global gold demand in the first quarter declined 18% to 1,034.5 tons. However, it is in comparison with the first quarter of 2016, which was the highest first quarter ever. 

There was slower demand in Exchange Traded Funds and in central banks. Bar and coin investment, however, was described as “healthy” while demand “firmed slightly” in both the jewelry and technology sectors, the WGC said. 

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High Gold Prices Cause Global Decline In Jewelry Demand

Record high prices for gold and increased investment demand for the precious metal, has led to the lowest demand for gold jewelry since 2010, according to the World Gold Council.

Gold jewelry demand declined 14 percent year-over-year for the second quarter of 2016 to 444.1 tons led by the two largest gold jewelry markets in the world, India and China, the WGC said in its quarterly Gold Demand Trends report. 

It’s a continuation of how the year began. Jewelry demand in the first half of 2016 fell by 185.5 tons from the prior year—out of which 149.4 tons was due to combined weakness in India and China.

Meanwhile, the U.S. continues to show improvement, along with Iran, according to the report. 

The dollar value of gold jewelry demand for the first half of 2016 was the lowest since 2010, at $36.3 billion. 

The high price of gold has led to a substantial increase in gold recycling. In the first half of 2016, gold recycling generated 686.7 tons of supply, the highest first half total since 2012. 

“We recently conducted a large-scale survey in which high gold prices were cited as the most important factor influencing the decision to recycle gold jewelry,” WGC said in its report. “Among the respondents in India and China who had ever sold gold jewelry, a high gold price was the most common reason cited for doing so (27% and 43% respectively).”

The Gold Demand Trends report adds that “price volatility can further magnify this effect.”

In India, “paltry import numbers and steep local discounts were omens of a disappointingly weak quarter,” WGC said. Official imports of gold were cut in half to below 100 tons (the lowest amount since 2013). 

The WGC says India faced three key issues: 

• A sharp jump in the gold price 
• Weaker rural incomes 
•Government regulation in the form of a 1 percent excise duty that caused a six-week strike by jewelers and resulted in an estimated 44 tons of smuggled gold entering the market.

In China, second quarter gold jewelry demand fell 15 percent to 143.5 tons due to high prices, low economic growth and weak consumer confidence. As a response gold recycling activity reached a nine-quarter high, according to WGC. In addition, changing consumer tastes in China had an impact as consumers are shifting to fashionable, unique, highly designed 18k or gem-set pieces as opposed to traditional 24k jewelry. 

“This trend may continue, given the younger profile of 18k gold jewelry customers, WGC said. “Our survey showed that, of the more-than 1,000 respondents who had bought gold in 2015, 18 - 30 year olds were more likely to buy 18k jewelry than 24k (39% vs. 25%).”

Some of the smaller markets in the Southeast Asia were positive in the second quarter, but the WGC attributes this to weak demand in the second quarter of 2015. “First half demand across all regional markets was subdued compared with 2015, registering single-digit percentage changes.”

In the U.S., a slight 1 percent year-over-year increase to 25.9 tons marked the 10th consecutive quarter of year-over-year growth. In the first half of 2016, jewelry demand reached a seven-year high of 48.6 tons. This is despite a more subdued consumer environment ahead of the presidential elections.

“Growth in jewelry and watch sales comfortably outstripped that of general retail sales for much of the year-to-date, although the comparison was slightly flattered by weak gains in early 2015,” the WGC said. “Consistent, if moderate, economic growth and improving employment levels are supporting demand, although enthusiasm in the sector can be expected to wane over the coming months as the elections draw nearer.”

In the Middle East, demand remained weak, with the exception of Iran (due to the removal of international economic sanctions). The WGC blamed the combination of high gold prices, relatively low oil prices and continued geopolitical unrest. 

Demand in Egypt hit a record low of 5.3 tons. “The domestic currency remains very weak, following the devaluation in March making local gold prices punitively high for many consumers,” the WGC said. 

Meanwhile, demand in Iran continued to improve, growing 10 percent in the second quarter to 17.9 tons.

In Turkey, second quarter demand dropped 25 percent year-over-year to 8.7 tons. “Ongoing political tensions, reduced tourism, rising unemployment, together with collapsing export revenues from Russia affected local sentiment towards gold,” the WGC said. 

In Europe, “jewelry markets have been relatively subdued so far this year,” WGC said. “Despite the higher gold price, stabilization or modest growth was the norm as economies continue to recover and the high-end of the market continues to grow.”

France was an exception as demand slipped 2 percent to 2.5 tons. Demand in the U.K. grew marginally to reach 8.2 tons in the first half, the strongest first-half showing since 2010. 

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19% Decline In Gold Jewelry Demand

Higher prices for gold and market-specific difficulties led to a steep decline in gold jewelry demand for the first quarter of 2016, according to the World Gold Council. 

Global gold jewelry demand fell 19 percent, year-over-year, to 481.9 tons for the period (a four-year low) led by large declines in demand in India and China, the two largest gold markets, the WGC said in its quarterly “Gold Demand Trends” report.

But the decline in demand spread worldwide as a 122 percent increase in gold investment demand led to a surge in the price of the precious metal. The WGC attributed this increase in demand to a “swirling uncertainty" created by a "mix of factors" that "undermined confidence in traditional asset classes.” This included Negative Interest Rate Policies implemented by the central banks of Japan and Europe, China’s devaluation of the yuan fueling fears over the country’s economic health, and the expected slowing pace of interest rate rises in the U.S. 

This resulting increase in the price of the precious metal slowed jewelry making activity in much of the world. There were few bright spots. 

India’s jewelry manufacturing operations “virtually ground to a halt” in March due to “a combination of surging prices and industrial action in protest at government policy,” the WGC said. The protests erupted with the India’s government announced plans to impose a 1 percent excise tax on jewelry manufacturing. Jewelry stores throughout much of the country closed for the entire month of March and into April. 

The result was that first quarter gold jewelry demand fell 41 percent to 88.4 tons in India, a seven-year low. However the WGC added that it believes business will soon return to normal as most stores re-opened in the second half of April for the Akshaya Tritiya festival in early May and the start of the wedding season. 

Meanwhile, China saw a 17 percent decline in gold jewelry demand year-over-year to 179.4 tons due to “sharply rising gold price against a background of continued economic slowdown,” the WGC said.

The high price of gold took its toll in other Asian markets. Malaysia (-23%) and Indonesia (-10%) were the weakest performers. 

Vietnam was an exception to the depressed regional market, with jewelry demand 6 percent higher year-over-year. However, the WGC warned that at least some of this growth could be attributed to investment demand. 

The US proved to be one of the few bright spots in the world as demand for gold jewelry continues to grow. In the first quarter demand increased 2 percent year-over-year to 22.6 tons, marking the ninth consecutive quarter of year-over-year gains, “impressive for a market where economic growth has remained relatively anemic,” the WGC said. 

Some retailers were re-entering the gold jewelry market after slashing or completely eradicating their gold product offerings, WGC said. In addition, double digit gains in gold jewelry imports in January and February “was a clear indication of US consumers’ continued desire for gold jewelry.” 

The lone bright spot in the Middle East was Iran where gold jewelry demand rallied by 10 percent year-over-year to 9.9 tons as the market continues to feel the benefit of the lifting of Western sanctions. However, the WGC added that this growth was tempered by the impact of 9 percent VAT. 

The remaining Middle Eastern markets uniformly saw double-digit losses in the first quarter as the region is beset with low oil prices and weak tourism revenues, in addition to the high price of gold. Egypt was the worst casualty as demand fell 18 percent to 7.7 tons.

In Turkey, gold jewelry demand declined 18 percent to 8.5 tons as the high price of gold, a struggling domestic economy and terrorist activities weighed on sentiment, the WGC said.

In Europe, gold jewelry demand was lackluster with a 1 percent increase to 12.7 tons. 

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2015 A Down Year For Gold Jewelry Demand

Colorful gold chains by Pomellato. Photo by Anthony DeMarco

There were few bright spots in the global gold jewelry market for 2015 as regional tensions continue to slow jewelry sales.

Annual gold jewelry demand declined 3 percent in 2015, year-over-year, to 2,414.9 tons as many markets remain under the strain of geopolitical tensions and instability, according to the World Gold Council. Fourth quarter demand meanwhile was a bit more stable with a 1 percent drop in jewelry demand, year-over-year, to 671.4 tons. In value terms, the decline was 9 percent. 

India, the second largest gold jewelry market in the world, was the main driver behind the gold jewelry economy this year, although it was not enough to offset losses in China, Turkey Russia, and the Middle East. In the U.S., steady, slow growth continues while spending on gold jewelry remains flat in Europe. 

India
A surge in demand in India during the second-half of the year resulted in a 5 percent gain in demand in 2015 to 654.3 tons (its third highest level on record) and ended the year with a fourth quarter increase of 6 percent to 173.1 tons. 

The WGC said November and December were “particularly upbeat” led by the five-day Diwali festival, which was preceded by a drop in the price of gold, leading to greater demand. Severe rains and flooding in southern India followed by reduction in foreign investment led to the first-half decline in demand. 

China
Demand in the world’s largest jewelry market saw a 3 percent drop in gold jewelry demand, year-over-year to 783.5 tons. Meanwhile, fourth quarter demand fell by 1 percent to 202.6 tons. The WGC blames the “economic slowdown and the stock market turmoil of the first half of the year was the primary driver behind this weakness, through its damaging effect on wider consumer sentiment.”

The WGC adds the country faces difficult times for retailers as tightening credit lines and slowing economic growth has put pressure on margins. Small regional brands, especially those in tier 3 and 4 cities, have suffered most. Larger retailers have fared better, “supported by a better product range and deeper pockets.” About 85 percent of the market consists of 24k jewelry with higher-margin 18k product grabbing more market share. Inventories are being managed conservatively, the WGC adds.

Hong Kong
The small but important market saw its gold jewelry demand “practically collapse,” with a 23 percent drop in the fourth quarter alone to 13.6 tons. The island is heavily dependent on mainland China tourists, which saw a steep decline in 2015 and into 2016. 

U.S.
Demand for gold jewelry increased 3 percent in the fourth quarter to 45.6 tons, matched by a “cautious” 3 percent increase in annual demand to 119.6 tons, the WGC said. The U.S. has now experienced eight consecutive quarters of growth. The main benefit was a drop in the gold price in the third quarter, which aided buying by retailers for the Christmas season. 

“The tentative uptrend that began in 2013 continues to hold for now, but feels fragile,” the WGC said. “On the one hand, consumers have seen their disposable incomes benefit from lower oil and heating prices. But on the other hand, a shift has been seen towards spending on travel and leisure rather than on retail goods. While creeping improvement in economic indicators provides some support, there is little call for enthusiastic optimism in the outlook for 2016.”

Other Asian Markets
Overall, the smaller Asian markets were a “mixed bag,” the WGC said, with growth in Japan, Vietnam, Indonesia and South Korea offset by losses in Thailand, Malaysia, Taiwan, the WGC said.

Vietnam was the high point as demand for gold jewelry expanded by 31 percent year-over-year in the fourth quarter to 3.9 tons, yielding a 25 percent increase in annual demand to 15.6 tons. This is due to a steep drop in the local price of the precious metal in 2015, combined with lower inflation and stronger economic growth, the WGC said.

Turkey
The important gold jewelry manufacturing hub wrestled with economic, political and regional disruption over the past year and is seen by the WGC as one of the major causes of the global decline in gold jewelry demand in 2015. Fourth quarter results were very much along the lines of the year-over-year weakness seen over the preceding three quarters as demand fell 26 percent to 15 tons. The lira is weak, which kept local gold prices elevated. “The fragile domestic economic and political backdrop—and proximity to conflict in Middle Eastern countries—badly affected consumer sentiment in the market,” the WGC said. “As did the terrorist incidents that spilled onto domestic soil.”

Middle East
Iran is the only bright spot as demand in the region declined 5 percent to 51.4 tons in the fourth quarter, giving an annual total of 224.1 tons, the lowest since 2012. “Unsurprisingly, further falls in the price of oil and continued conflict across the region have fed through to declines in gold jewelry consumption,” WGC said. “Declining tourist revenues were an added factor in the UAE.”

Russia
Annual Russian jewelry demand slumped to a 14-year low of 41.1 tons—39 percent below the 2014 total. Demand in the market has “collapsed” since the middle of 2014, with six consecutive quarters of double-digit losses. “Already crippled by the after-effects of military intervention in the Ukraine (namely, a freefalling currency and international sanctions), the market has been further clobbered by plummeting oil revenues,” WGC said. “There is little room for improvement in demand over the coming year.”

Europe
Demand for gold jewelry in demand declined by 1 percent in both the fourth quarter and full-year of 2015 (to 35.7 tons and 75.8 tons respectively). Slight improvement in the UK (+1%) and Spain (+6%) were offset by declines in France (-5%), Germany (-2%) and Italy (-3%) continued to shrink. 

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India Fuels A 14% Plunge In Global Gold Jewelry Demand

24k gold necklace by Gurhan

Widespread declines in Asian and Middle Eastern countries led by India fueled a year-over-year 14 percent reduction in gold jewelry demand to 513.5 tons for the second quarter of 2015, according to the World Gold Council. Modest growth in North American and some European markets was not enough to offset the decline.

India, the second largest market for gold jewelry, experienced a 23 percent year-over-year reduction to 118 tons, according to the WGC’s “Gold Demand Trends” quarterly report. This was largely due to extreme weather patterns (heat waves and unseasonal storms) in rural parts of the country, damaging crops, affecting the economic cycle in the regions. This was combined with the government’s decision to trim the selling prices for those crops, including rice and wheat. The rural areas account for about half of all Indian gold jewelry demand, the WGC said. Demand among urban consumers was more resilient.

In China, the world’s largest gold jewelry market, gold jewelry demand fell 5 percent in the second quarter due to the surging than plunging stock markets during the period. Both occurrences caused declines in gold jewelry demand, the WGC said. The rise in the stock market took people’s attention away from gold and the drastic stock market decline led to a detrimental impact on consumer sentiment.

“The Chinese jewelry industry faced a challenging time as manufacturers and retailers chased a smaller pool of consumers, leading to excess capacity,” the WGC said. “This partly helps to explain the increased market share of 18k jewelry as manufacturers reallocated resources towards promoting this higher-margin product.”

One of the few bright spots for the second quarter of 2015 was in North America, led by the US, in what the WGC describes as a “gentle upward course.” Year-over-year growth for the second quarter was 2 percent to 25.5 tons. This was highlighted by a year-over-year 11 percent rise in gold jewelry imports for April and May.

“The slightly erratic nature of US economic recovery has proved a headwind to more convincing growth, but we expect the recovery in demand to gain momentum as yet lower prices feed through to consumers,” the WGC said in its report.

In Canada demand rose by 5 percent and in Mexico by 7 percent. In South America, Brazil experienced an 8 percent decline.

In Europe, growth was marginal with a 1 percent increase in demand driven by modest gains in the UK (6%), Spain (6%) and Germany (7%). This offset declines in France (-8) and Italy (-5).

“While Italy’s export sector benefitted again from the upturn in the US, domestic demand continues to stagnate – hit by the weaker euro,” the WGC said. “UK jewelry demand continued to build on the solid base established in 2012. Total first half demand of 8.2 tons was the highest since 2010 and the recent gold price declines point towards further improvement over the remainder of the year.”

In the Middle East, gold jewelry demand dropped by 20 percent with all countries in the region reporting a decline.

* Turkey - Currency depreciation caused a 30 percent drop in demand.

* Russia – Demand fell by 45 percent. The WGC did not elaborate.

* Iran – The country experienced a number of negative forces driving down second quarter demand by 31 percent, including an increase in VAT, lower oil prices, currency weakness and international economic sanctions.

* UAE – Jewelry demand fell 22 percent due to lower spending by European tourists and regional geo-political tensions.

Among the smaller Asian markets, gold jewelry demand was mixed:

* Thailand – demand fell 5 percent due to continued economic contraction following last year’s military coup.

* Malaysia – Demand fell 5 percent to its lowest quarterly total since 2011due to the introduction of a 6 percent Goods and Services Tax in April.

* Japan – Demand increased 5 percent, aided by higher numbers of Chinese tourists.

* Vietnam – The country outperformed the rest of the region with a 22 percent jump in demand fueled by lower prices.

* Singapore – Demand fell 18 percent.

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Regional Instability Causes 3% Drop in Global Gold Jewelry Demand

Emperatriz Maxi Earrings by Carrera y Carrera

The world continues to be more complicated and complex as it also becomes more interdependent. The World Gold Council’s Gold Demand Trends report for the first quarter of 2015 reflects this instability.

Global gold jewelry demand for the first quarter of 2015 declined 3 percent to 600.8 tons, primarily due to large swings in demand in regions throughout the world, but particularly in the world’s two largest gold jewelry markets: China and India.

The largest decline in gold jewelry demand in tons came from China, which fell by 10 percent year-over-year to 213.2 (a 23 ton decline), according to the World Gold Council’s quarterly report, Gold Demand Trends. This was offset by a 22 percent rise in demand in India to 150.8 tons (a 27-ton increase).

“The impact of these two key markets is illustrated by removing them from the global total,” the World Gold Council said in its report. “Jewelry demand excluding China grew 1 percent, year-on-year, while removing India from the total yields a 9 percent decline. The extent of this impact confirms the importance of both markets to global consumer demand.”

The WGC said the sharp increase in demand in India was more of a reflection of unusual weakness in the year-earlier period than any particular strength in the first quarter of 2015. Economic uncertainty and temporary government restrictions on the purchase of the precious metal restricted demand a year ago.

The story with China is somewhat similar in that first quarter 2015 demand was paired against a particularly robust first quarter of 2014. The WGC said the current decline in gold jewelry demand in China is due to three factors:

* Slowing GDP growth;
* Rallying stock markets; and
* Cautious outlook for gold prices.

“Against this background of factors, Chinese New Year—traditionally a popular time for buying and gifting gold jewelry—was relatively restrained,” WGC said.

Well-designed 18k gold is particularly appealing to the younger generation of Chinese, according to the report. In recent years, 24k “Chuk Kam” gold far outweighed the lower-karat segment, accounting for around 90 percent of the market at its peak, WGC said. Eighteen-karat gold now accounts for around 12 percent of the gold jewelry market in tonnage terms.

“Despite the year-on-year decline in Q1, the longer-term rising trend remains firmly intact,” the WGC said.

Jewelry demand in Hong Kong was down 26 percent as it was harder hit by the Chinese government’s anti-corruption campaign than the mainland. The number of tourists visiting from the mainland China jumped during the Chinese New Year holiday in February. However, it was followed by a 10 percent decline in March on tension between Hong Kong and the Chinese government. Measures to limit the number of trips Shenzhen residents can make to Hong Kong were introduced in April, which may further dampen demand in the second quarter, the WGC said.

In the US, gold jewelry demand experienced its third consecutive year-over-year increase in the first quarter as what the WGC describes as a “fragile recovery” continues with household wealth and economic growth. This year the increase in first quarter gold jewelry demand was at 4 percent to 22.4 tons.

Higher carat jewelry remains popular the US. “However, (consumers) were cautious in their approach to spending and the trade views the prospects for the remainder of the year with guarded optimism,” the WGC said.

It adds that “conservative consumer attitudes towards spending and a general lack of innovation in the design and market are potential headwinds.”

The UK market continues to mirror US trends, WGC said, where demand there also grew by 4 percent. However, European markets as a whole were weaker where demand dipped by 2 percent to 12.5 tons “amid stronger euro prices and mixed economic signals.”

In the Middle Eastern markets, domestic unrest, particular in Egypt, has had an impact on gold jewelry demand. In Egypt, demand fell by 31 percent to its lowest level since the second quarter of 2012. The entire region, with the exception of Saudi Arabia (which grew by 5 percent), saw varying year-over-year declines that on average were at 8 percent. Russia reported the largest drop in gold jewelry demand at 40 percent. Turkey saw a 28 percent decline in demand.

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10% Drop in 2014 Global Gold Jewelry Demand

This Indian woman who reportedly wore more than $600,000 worth of jewelry to her wedding may have helped India achieve an 8 percent gain in gold jewelry demand in 2014

Global gold jewelry demand fell 10 percent year-over-year in 2014 to nearly 2,153 tons as strong growth in India, the US and UK couldn’t offset declines in many other large gold markets, the World Gold Council said Thursday.

The WGC, in its quarterly Gold Demand Trends report for the fourth quarter and year-end 2014, says the decline was largely due to extremely strong comparisons to 2013. 

“2014 was always going to be a difficult year for jewelry demand, contending with comparisons to phenomenal strength in 2013,” WGC said in the report. “After a steep drop in Q2, demand for gold jewelry gradually recovered, culminating in the strongest Q4 since 2007.”

The report also notes that the year-end figure is “comfortably above” the 2,053 ton average for the the prior five-years. 

Despite the drop for 2014, year-over-year fourth quarter demand actually grew by 1 percent to 575 tons, again led by a surge in year-end demand in India, the US and the UK, according to the report. 

The report, which also tracks gold demand for technology, investment and central bank net purchases, says jewelry remains the biggest source of demand for gold, accounting for nearly 55 percent of total demand in 2014. 

Declines were reported in much of the world including nearly all of Asia, the Middle East, Russia and in gold manufacturing centers Turkey and Italy. 

The biggest surge in demand for 2014, by far, was in India—one of the two largest gold markets in the world. India had its strongest year for jewelry demand since the WGC began tracking demand in 1995, up 8 percent year-over-year to 662 tons. Wedding- and festival-related purchases drove fourth quarter demand up 19 percent and first-half 2014 up 37 percent, year-over-year. “The second half of the year was the strongest H2 in our data series (from 2000),” the WGC said in its report.

However, it should be noted that the results in India are being compared with extremely weak 2013 results, due to restrictions of gold imports and the decline in value of the local currency in 2013. 

The other largest gold jewelry market in the world, China, saw its 2014 demand fall by 33 percent year over year to 623.5 tons. Despite this, it was still the second best year for jewelry demand in the country since WGC records began. 

In the US, jewelry demand showed year-over-year growth for the seventh consecutive quarter. Its fourth quarter result of 54 tons was a 13 percent year-over-year increase and the strongest fourth quarter since 2009. The 2014 full year demand of 132.4 tons was a 9 percent year-over-year increase and the highest year-end total in five years. 

“That being said, it clearly has to be acknowledged that the market remains far below pre-crisis levels of jewelry demand, which between 2000 and 2006 averaged 360 tons per year,” WGC added.

In the UK, demand increased by 18 percent in 2014 to 27.6 tons. In the fourth quarter sales increased by 14 percent to 15.9 tons, led by the introduction of “Black Friday” sales events for the Christmas holiday season, the WGC said. 

“Lower carat gold jewelry took market share from silver and some interest in heavyweight plain gold chains was reported,” WGC said. 

In most other major gold jewelry markets, demand was down. 

The Asian region was generally weak, with smaller markets “affected by its own individual set of adverse economic circumstances that proved detrimental to jewelry demand,” WGC said in its report. Japanese demand for jewelry slid 8 percent in 2014 to an all-time low of 16.3 tons as the already ailing consumer sentiment “was dealt a blow by the sharp fall in the value of the yen after the central bank unexpectedly expanded its monetary stimulus program in the last quarter.” 

There was a 12 percent decline in demand in Indonesia, the largest of the non-Chinese Asian markets, due high inflation and political upheaval. Newly elected President Widodo announced the removal of gas subsidies in October, “which further choked disposal income.”

Vietnam bucked the trend with a 4 percent gain in 2014.

Other markets are as follows:

* Turkey, demand was down 7 percent to 68.2 tons. 

* Middle East, markets in this region lost a combined total of 8 percent in 2014 to 174.1 tons.

* Russia, gold jewelry demand in Russia dropped sharply in the fourth quarter, leading to a net decline of 4 percent to 70.6 tons for 2014. “The stratospheric rise in the gold price during the fourth quarter (as sanctions and sliding oil prices hit the domestic currency) proved too steep for many consumers.”

WGC says that Jewelry is by far the largest component of above-ground stocks of gold—accounting for almost half of the 177,200 tons of gold estimated to be held by private owners and central banks. 

The total global gold market in 2014 declined 4 percent to 3,923.7 tons, according to the report. The total global supply of gold was flat at 4,278.2 tons. 

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April Marks 10th Month of Retail Sales Growth

Retail sales increased for the tenth straight month in April, further evidence that the retail sector and consumer spending continue to lead the economic recovery, according to the National Retail Federation. However, the amount of sales growth fell short when compared to prior months.

Retail industry sales (which exclude automobiles, gas stations, and restaurants) for April increased 0.2 percent seasonally adjusted from March and 4 percent unadjusted year-over-year, a positive but modest increase compared to previous months’ results, evidence that some consumers are beginning to feel the strain of high food and gas costs, NRF said Thursday.