Gold Jewelry Demand Up 18%, Total Demand Up 29%

The gold price rose for the tenth consecutive year in 2010 reaching $1,405.50 an ounce by the end of December on the London PM fix, a 29 percent increase from last year’s levels, the World Gold Council reports.

Last year’s price performance was driven by developments in key gold markets, WGC said in its Gold Investment Digest for the fourth quarter and full-year 2010. China saw increased investment activity, driven in part by innovative new gold investment vehicles offering improved access to the gold market. Globally, investors remained concerned about uncertainty in the macro-economic environment and turned to gold to hedge against weakness in the US dollar and rising inflation in many economies.

However, WGC noted that despite its high cost, global jewelry demand totaled 1,468 tons during the first nine months of 2010—a year-over-year increase of 18 percent. This includes a rebound in gold jewelry consumption in India, the world’s largest gold market.

In addition, gold demand for technological and industrial applications continued to recover during the first nine months of 2010, registering a 19 percent increase over the same period in 2009.

“The gold story in 2010 is about growth in demand and not just economic concerns. It is significant that consumers increased their gold jewelry spending during the first nine months of last year, despite the rising price of gold,” said Juan Carlos Artigas, WGC Investment Research Manager. “Strong investment activity and a normalization of gold demand in technological applications during the same period further supported gold’s stellar appreciation.”

Complete full-year data for gold demand will be available in February when the WGC publishes its Gold Demand Trends report.

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Gold Jewelry Demand Up 17% in 2010 led by India and Asia While Demand in U.S. and Europe Remains Sluggish

Annual demand for gold jewelry rose 17 percent to 2,059.6 tons as Asian consumers continue to drive jewelry demand, the World Gold Council reports. The rise in annual average prices over the same period was 26 percent.

In value terms, this resulted in record annual jewelry demand of $81 billion in 2010, according to the WGC’s quarterly Gold Demand Trends report, a 47 percent increase over 2009.

In India, 2010 was a record year as gold jewelry demand rose 69 percent to 745.7 tons. In local currency terms, Indian jewelry demand more than doubled for the year; boosted by a 20 percent rise in the rupee price of gold combined with a 69 percent increase in the volume of demand pushed up the value of gold demand by 101 percent.

“The rising price of gold, particularly in the latter half of the year, created a ‘virtuous circle’ of higher price expectations among Indian consumers, which fuelled purchases, thereby further driving up local prices,” WGC said in its report.

In China, 2010 saw annual gold jewelry demand increase 13 percent to 400 tons. The value measure of demand was more striking, rising 41 percent.


Meanwhile, In the U.S., the long term downtrend in demand for gold jewelry continued throughout 2010, although the pace of decline slowed somewhat, WGC said. Fourth quarter demand of 47 tons was 16 percent below year-earlier levels, translating to a decline of 14 percent on an annual basis. U.S. demand in value terms in 2010 rose by 8 percent to $5 billion.

European gold jewelry consumers, facing continued economic problems, were similarly discouraged by higher gold prices and tonnage demand declined accordingly in these markets, WGC said. Italian demand was 16 percent weaker year-on-year in 2010. Full-year demand in the UK was similarly weak, down 14 percent. On a value basis demand was slightly more robust. Annual demand in Italy was up 12 percent, while UK demand increased by 10 percent.

In Hong Kong, annual jewelry demand reached a 10-year high of 20.6 tons; while demand in Taiwan was less resilient to the higher gold price, resulting in a jewelry demand decline in 2010 of 7 percent, year-over-year.

Gold jewelry demand throughout the rest of the Asian region was weaker relative to 2009 levels as consumers were deterred by soaring gold prices. All markets recorded double digit year-on-year losses, both in the fourth quarter and 2010 as a whole. In Indonesia, Japan, Thailand and South Korea, consumers shifted to lower carat and/or gem-set product and, in some cases, branded silver. In Indonesia in particular, average purity of gold jewelry suffered a notable decline, WGC said.

The one exception was Vietnam, where 2010 demand of 14.4 tons was just 5 percent down on 2009. “When considered in the context of a 30 percent increase in domestic gold prices over the same period, 2010 demand can be considered robust,” WGC said.

The value of annual demand in Japan held steady at 2009 levels, WGC said.

Consumers across the Middle East region responded to high and volatile gold prices in the fourth quarter by cutting back on their demand for gold jewelry. 2010 full year demand was between 6 percent 10 percent below 2009 levels for each of these markets.

In Turkey, 2010 annual demand holding broadly steady at 2009 levels. However, the comparisons are being made with exceptionally weak 2009 numbers, WGC said. By value, jewelry demand, 2010 demand increased by 20 percent, year-over-year. “However, in a historical context, this is still well below the levels of two-three years ago, WGC said.

Russian gold jewelry demand grew 12 percent in 2010, to 67.5 tons.

Overall, the WGC said annual demand of all gold usage (including as an investment and its use in manufacturing and technology) increased 9 percent to 3,812.2 tons, which was worth approximately $150 billion.

“This performance was mainly attributable to strong growth in jewelry demand, the revival of the Indian market and strong momentum in Chinese gold demand and a paradigm shift in the official sector, where central banks became net purchasers of gold for the first time in 21 years. The WGC expects total gold demand to remain resilient across jewelry, investment and technology sectors over the coming quarter.”

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U.S. Gold Jewelry Demand Down 8%; Global Jewelry Demand Up 6%; India Accounts for 32% of Demand

Gold jewelry demand in the U.S. fell 8 percent, year-over-year, to 21.7 metric tons for the second quarter of 2011, the World Gold Council said Thursday. However, in value terms, demand strengthened by 15 percent to $1.1 billion, which mostly reflects a 26 percent increase in the price of gold during the period.

“The combination of high unemployment, frail economic growth and stubborn inflation pressures produced an environment that was not favorable for gold jewelry demand,” the WGC said in its Gold Demand Trends report for the second quarter of 2011. “The quarter was characterized by continued thrifting among retailers among retailers in order to meet affordable price points and 10k items were encroaching 14k market share.”

The report went on to note that gold jewelry was facing “stiff competition” from silver, and specifically cited jewelry maker, Pandora, which specializes in silver charms. However, this company has lost some of its luster in recent weeks.

Overall global gold jewelry demand rose by 6 percent, year-over-year, to 442.5 tons, equivalent to $21.4 billion in value—led by India, which accounted for 32 percent of global jewelry demand, WGC said.

Gold jewelry demand in India rose 17 percent in the second quarter, compared with a relatively weak year-earlier period. In value, the rise was 42 percent for the period. The WGC noted that the Akshaya Tritya festival in May (traditionally a key gold jewelry buying occasion on the Hindu calendar) “stimulated a surge of buying.”

In China, jewelry demand in the second quarter, normally a quiet period, rose 16 percent, year-over-year, to 102.9 tons, WGC said. The local currency value of demand increased 40 percent, year-over-year, for the period. Demand for 24k and 18k gold in China represents gold's attraction as both an investment and as a reflection of the demand for better-quality jewelry.

“Increasing prosperity among Chinese consumers, supported by very strong growth in the domestic economy, is still a driving force behind gold jewelry demand,” the WGC said.

Among the European markets, Russia was the only country to experience limited growth for the second quarter, WGC said. Demand was “marginally higher” at 16.9 tons, which translated to growth in value of 27 percent. However, the WGC said that year-to-date imports have grown considerably in Russia as its economy improves.

The second quarter was weak for both Italy and the United Kingdom, with demand falling by 15 percent and 16 percent, respectively. In value, demand fell by 6 percent in Italy and 4 percent in the U.K. The report cites rising gold prices and continued economic weakness as the culprits.

Demand in Turkey was “unexpectedly” robust during the second quarter, up 7 percent to 17.4 tons, equivalent to 38 percent growth in value. Consumers purchased 22k gold jewelry during period of the quarter when gold prices dropped several times in May and June.

Among other Asian markets, gold jewelry demand fell 9 percent to 1.9 tons in Taiwan due to the rising price of the precious metal. However, gold demand for wedding sets grew 10 percent for the period.

In Japan, gold jewelry demand dropped 14 percent to 4.2 tons as consumers are still suffering from the March earthquake and tsunami, WGC said. In value terms, the decline was a more modest 4 percent. The WGC noted some “encouraging” signs in the Japanese market with increased demand for “very-high-end” jewelry and in gold chains, purchased more for investment purposes than adornment.

In the remaining markets in the Southeast region, gold jewelry fell due to its high price. Thailand, Indonesia and Korea reported year-over-year declines of 5 percent, 3 percent and 2 percent, respectively. In value terms, demand grew between 19 percent and 23 percent.

An exception for the region was Vietnam, where demand grew by 6 percent, year-over-year, to 3.3 tons, WGC said. This increase was concentrated in “chi” rings (plain 24k rings).

Middle East markets experienced weak second quarters. In Saudi Arabia, jewelry demand fell 16 percent to 21 tons, the largest drop in the region. Demand fell in Egypt by 8 percent to 8.3 tons. Demand from the other Gulf countries fell 4 percent to 4.9 tons. The most resilient market was the United Arab Emirates, I which demand fell by 1 percent to 16.1 tons.

Global gold demand for the second quarter of 2011 fell 17 percent year-over-year to 919.8 metric tons, according to the WGC Trends report. However, the value of the precious metal grew 5 percent to $44.5 billion—the second highest quarterly value on record due to the 26 percent increase in the price of gold during the period. Read more about the overall gold trends on my Forbes.com blog.

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High Gold Prices Deter Jewelry Demand

 

Global jewelry demand for gold declined 15 percent, year-over-year, to 476.5 tons in the fourth quarter of 2011, the World Gold Council reports. In value terms, demand was 5 percent higher at $25.9 billion, a quarterly record. 

For 2011, demand fell 3 percent, year-over-year to 1,962.9 tons, as the price of gold rose by 28 percent for the period. In value terms, demand grew by 25 percent to a record $99.2 billion, the WGC said in its Gold Demand Trends report. 

India and China account for 55 percent of total gold jewelry demand, WGC said.

The WGC defined the year for gold jewelry demand as a tale of two halves. The first half of the year saw demand increase by 9 percent, largely due to the precious metal’s two largest markets—China and India. Demand was also aided by a couple dips in price during the period.

The second half of the year saw demand decline by 13 percent to 941.2 tons due to “record gold prices reached during the third quarter, combined with an increase of price volatility, deterred consumers in a few key markets,” the WGC said in its Gold Demand Trends report for 2011.

Jewelry demand in India, the world’s largest market for gold, fell 44 percent (down 22 percent in value terms), year-over-year, to 103 tons. Annual demand of 567.4 tons was 14 percent below 2010 (down 13 percent in value terms). 

In China, the second largest gold market, fourth quarter gold jewelry demand was slightly above last year’s totals at 131.4 tons. The net result was an annual demand increase of 13 percent to 510.9 tons.

Fourth quarter jewelry demand in Hong Kong rose 37 percent to 7.1 tons, bucking the decline trend in Asia, due to “record inflows of tourists from mainland China, who continue to take advantage of lower taxes levied on gold in Hong Kong,” the WGC said.

In the U.S., gold jewelry continued its long term downward path with fourth quarter demand down 9 percent to 42.7 tons while full-year demand fell by 11 percent to 115.1 tons. By value, gold jewelry demand rose 12 percent for the quarter to $2.3 billion and 15 percent for the year to $5.8 billion. High prices for the precious metal, price volatility, a fragile labor market, depressed real estate prices and volatile stock market all contributed to hesitant consumer demand and fragile consumer confidence, WGC said.

“The independent, smaller jewelry stores have now begun to adopt a shift to silver jewelry that began among the major retailers in late 2010-early 2011,” WGC said.

In Italy, a major gold jewelry manufacturing center, fourth quarter gold jewelry demand dropped 17 percent to 14.8 tons (up 3 percent in value). For the year demand fell 17 percent to 28.8 tons. “Price remains the major hindrance to Italian gold demand, with increasing substitution to silver and other metals in the lower price ranges,” WGC said.

UK fourth quarter old jewelry demand declined 19 percent to 11.2 tons and down 17 percent 17 percent to 22.6 tons for the year.

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Cautious Optimism Fills Baselworld Buoyed by Asian Demand for Luxury

A fractured arm kept me from attending Baselworld this year. Fortunately, I know some of the best writers and experts in the jewelry and watch industry. One of those folks is William George Shuster who has kindly agreed to take time from his busy schedule to write a few stories from the tradeshow. Below is his first report from the event.

By William George Shuster
Special Correspondent

BASEL, Switzerland – Baselworld, the world’s largest and most important watch and jewelry trade show, opened March 8 amid optimistic expectations by many for good business in 2012—but not too optimistic.

“We’re confident about 2012” because of strong business results in 2011, especially in luxury due to China’s appetite for it,” said Francois Thiebaud, chairman of the show’s Swiss exhibitors and president of upscale watch brand Tissot, echoing many vendors, “but we’re not overconfident. The Eurozone crisis and debt problems elsewhere could still have effects [on business].”

This 40th annual BaselWorld fair, in Basel, Switzerland, Mar. 8 – 15, has 1,815 exhibitors (608 in watches, 689 in jewelry and 518 in related products and services) from 41 countries. More than 100,000 buyers and visitors from 100 countries are coming, and all is being reported on by more than 3,000 print, TV, radio and Internet journalists from around the globe.

The reason for their interest is obvious: Because Baselworld is, in the words of Show Director Sylvie Ritter, “a microcosm, where the players from the world’s watch and jewelry industry gather for a week.” It is an important bellwether of products, innovations and trends affecting the industry, consumers, and the retail business worldwide for year ahead.

Bullish. The cautiously bullish mood among exhibitors and analysts at the show is based on strong—even record-breaking—results for watch and jewelry exports and sales in 2011, especially in the luxury sector. That’s due largely to sharply rising consumer demand in Asia, especially China, say industry analysts in Basel. These strong business statistics for 2011 came despite many economic problems affecting sales and profits worldwide, they say, including the dramatic debt crisis in many Eurozone countries, the uncertain U.S. economy and the strong Swiss franc (which weaken Swiss watchmakers’ profits). Still, “[even] in this far-from-encouraging environment,” said Jacques J. Duchêne, long-time President of the Show Exhibitors’ Committee and former Rolex SA executive, at the annual pre-show press conference, “one industry has been able to stand up well and even break numerous records—the watch and jewelry industry.”

Indeed, it has. The year 2011 was “historic,” as Duchene put it, for the Swiss watch industry. Their exports totaled 19.3 billion Swiss francs (about $21 billion), an increase of 19.2 percent, making it the best year ever in the industry’s history—rebounding from its worst in 2009. Actual pieces exported were just under 30 million.

Unquenchable. Much of that was led by the seemingly unquenchable demand in Asia for fine watches: Over half (55 percent) of the Swiss exports went to Asia, primarily China, up 48.7 percent. (North America got 14 percent while Europe got 29 percent).

Duchene was quick to point out, however, that the Swiss success is not only due to the Far East. “It’s true demand was very buoyant in Asia,” he said, “but the watch industry has built up a good reputation in all emerging countries and succeeded in creating demand, especially in the luxury-products segment.”

So, “even in the face of a rather unfavourable economic environment, we envisage export growth in 2012,” Duchene said.

The Swiss aren’t the only ones feeling bullish about 2012. Spokesmen for the German, French, Italian, Israeli and Hong Kong delegations (the latter, being the show’s second-largest) also report good sales and export results in both watches and jewelry in 2012, despite the economic challenges, again especially in the luxury sector (and again, buoyed by record Chinese consumer consumption of revelry and watches). They too were upbeat about business results for the industry in 2012. As Gaetano Calvalieri, president of The World Jewellery Confederation (CIBJO) and spokesman for the Italian delegation, noted, “consumers in Asia, especially China, will carry Italian jewelry industry to new heights.”

Even if Chinese consumption slows slightly in 2012, as some reports suggest, “Even a one digit increase in demand this year is more than last year,” said Thiebaud.

"Excellent.” Those in the gem and diamond business also expressed upbeat predictions for 2012.

Eli Avidar, Managing Director of the Israel Diamond Institute Group of Companies, told its annual Baselworld luncheon that 2011 was “an excellent year” for the Israeli diamond industry, which exported $7.2 billion of polished diamond, and has “emerged from the crisis [of the 2008/2009 recession] stronger.” Again, some of this is due to Asia. “There is a steady rise in demand for large diamonds in China and we believe it will go much further,” especially is the international industry invests significantly in promoting diamonds and diamond jewelry in China. He also noted that there are “signs of recovery in the U.S. economy”—unlike Europe, where was no visible increase in diamond demand in 2001 or 2012—and we expect significant rise in demand in diamond jewelry in the U.S. this year.”

William George Shuster is a multi-award winning writer—including three Jesse H. Neal Award, business journalism's highest honor. He has 40 years experience as a journalist, author and editor. He is considered one of the world’s top watch industry journalists, covering the world of timepieces for the past 30 years.

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Double-Digit Decline in U.S. Gold Jewelry Demand

The high price of gold continues to have a detrimental impact on the worldwide jewelry market as demand in this sector for the precious metal fell by 6 percent, year-over-year, in the first quarter of 2012, the World Gold Council said Thursday. The value of jewelry demand, meanwhile, grew by 14 percent to $28.3 billion.

Gold jewelry demand was weaker in all but six countries and clearly reflects the year-over-year 22 percent increase in the average gold price of gold to 1,690.57, according to the WGC Gold Demand Trend report for the first quarter of 2012.

In the U.S., demand fell 10 percent to 17.6 tons. In addition to the high price of the precious metal, the report blames high gas prices and cautious consumers. In value terms, gold increased by 10 percent to $958.2 million.

In Italy, demand slid 14 percent to 3.5 tons “as the negative economic environment took its toll,” according to the report. In the U.K., demand dropped 4 percent to 3 tons.

India, the world’s largest consumer of gold and gold jewelry, was largely responsible for the worldwide decline, according to the report. An unexpected substantial increase in the import tax on gold and the introduction of an excise duty on gold jewelry resulted in a three-week countrywide strike among jewelers until the government agreed to end the excise duty. A weaker rupee also added to the decline.

Meanwhile, China dominated the jewelry market as demand increased 8 percent to 156.6 tons in the first quarter. China accounted for 30 percent of all demand for the period, making it the largest gold jewelry market for the third consecutive quarter.

Demand in Russia was also robust with a 28 percent increase in the first quarter to 20.4 tons, attributed partly to stock building among the trade. However, the repot notes that “historically low inflation, GDP growth, improving consumer confidence and real wage gold,” contributed greatly to the gains. “Gold remains the most popular metal of choice among Russian jewelry consumers.”

Overall, global gold demand in the first quarter fell by 5 percent to 1,097.6 tons, the WGC reports. “This decrease was largely to be expected given the introduction of import taxes in India and high gold prices,” the report states. “Demand for the quarter was underpinned by increased demand in China, continued central bank purchasing and inflows into exchange-traded funds.”

Gold demand value for the period increased 16 percent to $59.7 billion. Gold demand includes its use in jewelry, technology, investment and official sector institutions (such as world banks).

“China and India have seen continuing economic growth and whilst China’s economy is expected to slow, it will nonetheless surpass the rates of growth in the West,” said Marcus Grubb, managing director, Investment at the World Gold Council. “As we previously forecast it is likely China will become the largest source of demand for gold in 2012.”

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Global Gold Jewelry Demand Shows Signs of Life Thanks to India

Gold for jewelry fabrication measured by value saw a 13 percent increase during the fourth quarter of 2012, primarily due to robust demand in India, according to the World Gold Council. It was strongest quarter for global jewelry demand since the first quarter of 2011 and may signal signs of strength after years of sluggish consumer demand.

In 2012, gold demand for jewelry saw a 3 percent rise in terms of value to $102.4 billion, year-over-year, “as consumers continued to allocate greater sums to gold jewelry, despite the 6 percent year-on-year rise in the price,” according to the WGC in its quarterly Gold Demand Trends report for the full year of 2012.

However, don’t open those champagne bottles just yet. In terms of volume, gold jewelry demand fell 3 percent in 2012 to 1,908 tons.

India, the world’s largest gold jewelry market and the world’s largest gold market, had by far the largest increase in gold jewelry demand. By volume the increase was 35 percent to 153 tons and by value it was 37 percent to $8.47 billion, according to Gold Demand Trends, released Thursday.

Gold jewelry, particularly in the economically struggling Western markets, has been a difficult sell since at least 2008 because investor demand caused the price of the precious metal to skyrocket. Outside of India and China, by far the two largest gold jewelry markets (and to a lesser extent the global luxury sector), there is really no indication that gold jewelry’s sluggish performance will change soon in most regions of the world.

Even in China (the world’s second largest gold jewelry market), 2012 was a year where gold jewelry demand was largely flat. In terms of volume the increase was 1 percent to 145.8 tons. In value, demand rose by 3 percent to $8.03 billion. India too had several serious economic issues during the first half of the year (including high import duties, market turmoil and a local spike in the price of gold) that resulted in a reduction for gold jewelry. The second half of the year saw a “strong revival” in gold jewelry leading to the exceptionally strong fourth quarter.

The WGC report also noted “a further erosion of tonnage in the Western markets,” again caused by the high price of the precious metal. Italy, which has one of the largest gold jewelry manufacturing centers in the world, saw demand by tonnage decline by 15 percent in 2012.

In the U.S., jewelry demand in 2012 fell 6 percent by volume to 108.4 tons and fell 2 percent by value to $2.21 billion.

All of the Far Eastern markets, not including China and India (which now account for 56 percent of the gold being used for jewelry), saw weaker demand in 2012, according to Gold Demand Trends.

Egypt surprisingly saw a 35 percent increase in gold jewelry demand by volume but the WGC noted that it was still far below levels prior to the 2011 political uprising. Demand in Russia (the fourth largest gold jewelry market) increased for the second straight year. The market expanded in volume by 7 percent in 2012 to 81.9 tons.

In addition to jewelry and various investment vehicles, gold is used by the world’s central banks and for a number of technological purposes (such as electronics and dentistry). Overall gold demand measured by value increased to an all-time record of $236.4 billion. By volume, gold demand fell by 4 percent to 4,405.5 tons.

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U.S. Sees First Increase in Gold Jewelry Demand in 7 Years

Gold jewelry making a comeback.

Gold jewelry demand in the U.S. for the first quarter of 2013 grew by more than 5% year-over-year to reach a value of $986 million. This is the first increase in demand since the third quarter of 2005, the World Gold Council said Thursday.

The lower-end of the U.S. jewelry market rebounded considerably, the WGC in its quarterly Gold Demand Trends report, adding that it’s “a further positive sign of recovery in the U.S. economy, coinciding with a correction in the gold price over the course of the quarter.”

Meanwhile, the amount of gold used for the fabrication of jewelry worldwide increased by 12% year-over-year to 551 metric tons for the first quarter of 2013, worth a record value of $28.9 billion, according to the report.

The dramatic decline in the value of gold has led to an increase in demand, the WGC said in the report. However, that demand is largely limited to India and China, who continue to distance themselves from the rest of the world in their passion for gold jewelry. The two countries combined now account for 62% of gold jewelry demand, according to the report. The U.S. for the first time in more seven years saw a year-over-year increase in gold jewelry demand.

Other highlights of the report include:

* Gold jewelry demand surged by 19% in China to a record level, led by Chinese New Year gifting in January and a rebound in consumer sentiment, WGC said. This is despite new in leadership in China calling for less conspicuous consumption. Demand saw the largest increase in 24k gold jewelry, although demand for 18k gold jewelry also increased.

* In India, year-over-year demand grew by 15% and came just short of beating the fourth quarter 2012 record. However, that gain was compared a very soft first quarter of 2012.

* Meanwhile, gold jewelry demand in Italy and the U.K. fell dramatically, 12% and 7%, respectively, as difficult economic continues continue to lead consumers to purchase lower-karat gold and silver jewelry.

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Gold Jewelry Is Back as Global Demand Surges to 5-Year High

18k Picasso Gold brooch, Tiffany & Co.

Demand for gold jewelry in the second quarter surged to its highest level in five years due to a sharp drop in the price of the precious metal, the World Gold Council said Thursday.

Gold jewelry demand by volume increased 37 percent to 575.5 tons, according to the WGC’s Gold Demand Trend report for the second quarter of 2013. The demand for gold was so great that it far outweighed a decline in the average gold price as the demand in terms of value rose 20 percent to nearly $26.2 billion, the fourth highest on record.

The price of gold for the second quarter fell by more than $400 an ounce or 12 percent, according to the WGC, the marketing development organization for the gold industry.

“Although jewelry demand is influenced by a wide set of factors, including economic growth, consumer sentiment and disposable income, to name a few, all were eclipsed by the effect of the drop in the gold price,” the WGC said in its report.

The upward trend was “almost universal,” the WGC said, with the most notable year-over-year improvements in India, China, the Middle East and smaller Asian countries. Demand included an increase of higher-carat jewelry. Europe was the only region where jewelry demand failed to rise.

The US reported its second consecutive quarter of growth. Demand remained the healthiest at the higher end of the market, however, the WGC noted that the middle market is beginning to shift from lower- to higher-carat gold. The WGC also said the lower prices provided an opportunity for wholesalers to stock early for the Christmas holiday season.

India and China, again, generated the largest volume increase—almost 120 tons of the 155-ton increase in demand was from these two countries, according to the report. Hong Kong generated the strongest percentage growth in demand (approximately 65%), surging to a record 12.1 tons. In fact, double-digit growth was commonplace throughout the Asian markets, with the exception of Japan, which was unchanged. In Indonesia, demand of 7.8 tons was the strongest second quarter since Q2 2009.

In Turkey, a gold jewelry manufacturing center, demand hit a record high in terms of local currency value, led by consumer bargain hunting (concentrated in 22k market for investment) and trade inventory building. Growth across the Middle Eastern region was almost purely price-related, the WGC said.

The improvement in the US market was not replicated in the western European market, “where negative economic conditions overwhelmed the positive impact of lower prices,” the WGC said. In Italy, another major jewelry manufacturing center, demand fell by nearly 10 percent and in the UK demand dropped by more than 20 percent.

Jewelry demand in Russia “continued to normalize towards pre-crisis levels,” the report states, with demand concentrated on the high and low ends of the market.

The Gold Demand Trends report also tracks demand in gold for investment and technology purposes. In the second quarter, overall gold demand fell by 12 percent to 856.3 tons due to the drastic drop in the price of the precious metal. This translated to a 23 percent drop in value to $39 billion—its lowest level in more than five years.

“Record quarterly investment in gold bars and coins was countered by sizeable outflows from ETFs as western investors reacted to a seemingly more positive outlook for the US economy and an eventual tapering of quantitative easing,” the WGC said.

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5% Increase in Q3 Gold Jewelry Demand

Gold jewelry demand for the third quarter of 2013 increased 5 percent year-over-year to 486.7 tons, the World Gold Council said Thursday, marking the best third quarter performance for the precious metal since 2010. 

In terms of value, gold being used for jewelry for the period fell by 15 percent year-over-year, due to a drop in the trading price of the precious metal, according to the WGC’s Gold Demand Trends report for the third quarter of 2013. Demand for the period was worth $20.8 billion, the lowest quarterly value since the third quarter of 2010.

Global growth for the period was led by high-karat gold jewelry purchases in Asia, the Middle East and the US, 

“An almost universal phenomenon in the third quarter was the increasing popularity of higher carat jewelry,” the WGC said in its report. “Across Asia, the Middle East and in the US, higher carat jewelry was noted as an area of particular growth as the increased investment properties associated with gold of higher purity came to the fore. The fact that jewelry retailers in a number of markets were increasingly stocking investment products (small bars and coins) provided further evidence of the greater blurring of the jewelry/investment distinction.”

Consumers in China generated 163.7 tons of jewelry demand in the third quarter, making it by far the largest single jewelry market. The country’s year-to-date, demand of 518 tons already equals the same amount for the full-year 2012.

“To some extent, exhaustion set in towards the end of Q3 after such a frenetic second quarter, but continued expansion of the retail network confirms that the trade sees prospects for growth,” the WGC said.

Increases were reported in 24k jewelry (known as “chuk kam”), which has a purity rating of 95.95 percent and in “four nines” gold (gold jewelry of 99.99% purity, compared with the typical 24-carat purity of 99.95%). The WGC explained that the former is unique to China and is most popular with consumers in lower tier markets and rural areas as an investment hedge.

Mainland Chinese consumers also attributed to a 28 percent increase in gold jewelry consumption in Hong Kong to 7.5 tons.

In the US, the WGC noted that “demand was a key development.” Gold jewelry demand for the third quarter rose 14 percent year-over-year to 43.4 million tons.

With the exception of fourth quarter demand (driven by holiday sales), the third quarter was the first quarter in four years in which gross jewelry demand exceeded recycling—creating net positive jewelry demand,” the WGC said. “Since Q3 2009, gross new quarterly jewelry demand had been exceeded by the recycling of old gold jewelry as distress selling took off during the economic downturn,” WGC said. “Increasingly positive sentiment among US consumers during the third quarter reversed this trend.”

The report also notes a shift towards 18k jewelry from 14k.

“Given recent developments in the US, consumer sentiment has taken a hit early in the fourth quarter, but the seasonal impact, together with prices holding below US$1,400/oz, suggests a certain amount of resilience,” the WGC said.

India, one of the world’s largest markets for gold jewelry, saw demand drop by 23 percent year-over-year to 104.7 tons due to import restrictions imposed by the government. “Demand for gold jewelry among Indian consumers remains strong, but reduced supply has prevented this demand from being fully realized,” the WGC said.

"The smaller Asian markets had robust growth for the period, with the exception of South Korea where weak consumer sentiment and a sluggish domestic economy dampened demand," the WGC said. "Across the rest of the region, there was a trend for higher karat jewelry pieces of relatively simple design as consumers across the region took advantage of gold’s increased affordability."

Gold jewelry demand in the Middle East increased 9 percent to 51.2 million tons, due to lower prices across the region, the WGC said. The “unsurprising” exception was Egypt.

“The emphasis on 22-karat gold at the expense of 21- and 18-carat diamond-set jewelry suggests demand was stronger among domestic consumers relative to western tourists.”

The third quarter in Turkey, which is traditionally strong, saw year-over-year demand increase 14 percent. In value terms, demand was virtually flat, due to a 12 percent decline in the local currency price of the precious metal.

Russia’s growing middle class, armed with greater disposable income, helped generate a 7 percent year-over-year growth in jewelry demand.

“European markets were again the exceptions to the more positive global picture, with both UK (-14%) and Italy (-7%) posting year-over-year declines due to “economic concerns,” WGC said.

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China is Number 1 In Luxury Watch Demand

Omega is a favorite luxury watch brand in China.

China has surpassed the U.S. as the country with the highest demand for luxury watches based on Internet searches, according to a survey released Wednesday.

China represents 23 percent of all watch-related searches, according to the WorldWatchReport, published by Digital Luxury Group. Gaining the most attention in China is Omega (20.2 percent of searches there), followed by Longines (18.9 percent) and Rolex (10.5 percent).

It is the first since the survey began in 2004 that the U.S. wasn’t number one based on these digital criteria.

In addition to the growth witnessed in China (up 7.8 percentage points), countries such as Japan (3.5 pp), India (0.6 pp), and Russia (0.5 pp) saw significant increases over last year, according to the survey. Most western markets remained stable or even saw market share drops, such as in the U.S. (down 9.2 pp), Germany (-1.7 pp), and Italy (-1 pp).

I don’t understand how exactly this virtual demand translates into real demand much less actual sales, but it no doubts shows that Asian consumers have an extremely strong interest in luxury watches and that luxury watch brands moving into China are doing the right thing.

Rolex and Omega are the top two brands in demand, but the lead that Rolex held over Omega in prior years is narrowing. The difference in demand between the two brands is 2.3 percentage points, against 8.4 in 2009—mainly explained by Omega gaining market share in China while Rolex reinforced its positioning in the stagnant West, according to the study.

Among the more than 1,300 individual watch models tracked by the WorldWatchReport, the top three models are Omega’s Seamaster, Rolex’s Submariner and Rolex’s Daytona, according to the survey.

Global searches related to counterfeits and replicas experienced a decrease, representing 1.85 percent of total luxury watch searches compared to 4.5 percent last year. Among the 40 brands analyzed, the demand for replica sport watches is the highest, with Rolex representing 51 percent of the total demand for counterfeits worldwide, followed by Breitling (9 percent) and TAG Heuer (5.3 percent).

The WorldWatchReport measures and benchmarks more than 50 digital indicators to analyze the performance of 40 luxury watch brands across 20 international markets.

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