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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Jewelry and Watch Sales Drive Global Luxury Consumption

Double-digit growth in jewelry and watch sales, strong demand in China and Latin America, and resurging U.S. and European markets have all contributed to what is expected to be a growth of 13 percent in worldwide luxury consumption in 2011, according to a recently released report.

Consulting firm, Bain & Company, which created the report, revised its overall 2011 growth projections from the 8 percent growth in luxury consumption it predicted in May.

Jewelry and watch sales are expected to grow by 18 percent year-over-year in 2011, driven by self-purchasing women in emerging markets, according to the report. Accessories sales are expected to increase by 13 percent and apparel by 8 percent for the year.

The annual study was done for Altagamma, a trade organization that represents the largest luxury goods companies in Italy. The organization released the report in Milan on Monday.

Luxury sales growth in the Americas for 2011 is expected to be 8 percent, led by 20-percent growth in Brazil. Europe is expected to show a 7 percent growth rate for the year. Asia again is the engine that is driving the luxury economy. 2011 sales are expected to grow 25 percent, year-over-year, “with no sign of slow down,” according to the report. “China remains the champion of the region,” with an expected 35 percent rate of growth in 2011, equaling the prior year’s consumption growth. “Chinese customers already account for more than 20 percent of total worldwide luxury consumption,” according to the report.

In a separate report by Bain for Altagamma, also released Monday, it predicts that the growth of the luxury market will decline, but sales will still be strong in many luxury goods categories and geographical regions.

The jewelry, watches, pens and lighter category is expected to grow by 10 percent for 2012—the same rate of the growth is projected for leather goods, shoes and accessories. Apparel is expected to rise by 6.5 percent; followed by fragrances and cosmetics (4.5%); and tableware (2%).

The strongest geographical region for luxury goods and services will again be Asia, which is expected to grow by 16 percent, and Latin America, with 10 percent growth predicted. Expected growth in luxury sales for other regions is as follows: Middle East (8.75%), North America (6%), Europe (3.75%), and Japan (1.75%).

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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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Mila Kunis Featured in Global Advertising Campaign for Gemfields

Mila Kunis, recently named “Sexiest Woman Alive,” by Esquire, is the newest ambassador and the face of the latest advertising campaign for colored gemstone producer, Gemfields.

In a statement Gemfields said that Kunis was chosen “for her natural beauty, versatility, intelligence and love of rare colored gems.”

Gemfields primary business is the mining, distribution and marketing of emeralds from the Kagem mine in Zambia. It is working to produce a mine-to-market strategy for their emeralds that it says will be ethical, transparent and sustainable. The company recently acquired Fabergé, and is supplying the luxury brand with Kagem emeralds for its newest creations. Both companies are controlled by Pallinghurst Resources, a private equity company focused on the mining sector.

The advertising campaign with Kunis is photographed by Mario Sorrenti and styled by Anastasia Barbieri, featuring “a fresh-faced and modern Kunis wearing one-of-a-kind emerald and ruby jewelry created by six of Gemfields’ designer partners: Alexandra Mor, Amrapali, Dominic Jones, The Gem Palace, Sutra and Fabergé.”

Kunis toured Kagem, accompanied by Ian Harebottle, Gemfields CEO, and visited several Gemfields-sponsored community projects, including schools and a farming cooperative.

“While in Africa, I learned that the entire journey that each Gemfields stone takes is carefully considered and that the environment and the local communities where its mines are located are held in the highest regard,” said Kunis.

“Mila has blown me away with her energy, enthusiasm and dedication,” Harebottle said.

The global advertising program is running in leading publications in India and is part of a several initiatives in a multi-pronged consumer campaign that Gemfields will roll out this year.

The Kagem mine also produces amethysts. Gemfields other business include a mine in Mozambique for rubies, and prospecting licenses for other gemstones in Madagascar.

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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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Tiffany Q2 Earnings Up 16%, Global Sales Up 4%

Exceptional growth in China along with improvements in operating margins led to a better-than-expected 16 percent net earnings increase to $107 million, or $0.83 per diluted share, in the second quarter for Tiffany & Co.

Worldwide net sales for the New York-based luxury jeweler rose 4 percent to $926 million. On a constant-exchange-rate basis, worldwide net sales rose 8 percent, and comparable store sales rose 5 percent due to sales growth in most regions.

As a result, the company raised its year-end outlook to $3.50-$3.60 per diluted share, from $3.43-$3.53 per diluted share in its first quarter outlook. It also plans to continue its worldwide expansion of stores unabated.

In addition to regional growth, product categories also performed well, according to Tiffany’s second-quarter earnings report released Tuesday. The results were dampened a bit by lower-than-expected sales growth in the US and the drastic decline of the Japanese Yen.

Mark L. Aaron, Tiffany VP-Investor Relations, said in a conference call Tuesday that growth in fine jewelry and statement jewelry were extremely strong and outperformed modest growth in fashion jewelry. He added that diamond jewelry, led by colored diamonds, did well particularly well for the period.

Gross margin (gross profit as a percentage of net sales) increased to 57.5 percent in the second quarter from 56.3 percent a year ago. Aaron said this was the result of diminishing product cost pressure and price increases taken earlier in the year. This help lead to a “better-than-expected” improvement in operating margin.

“We were pleased with the results of our efforts to improve gross margin which, combined with well-controlled expenses, yielded a solid increase in operating margin,” added Michael J. Kowalski, Tiffany chairman and CEO.

Sales by region are as follows:

* In the Americas, total sales increased 2 percent to $444 million in the second quarter. Comparable store sales were unchanged in the quarter, led by growth in Tiffany’s New York flagship store sales. Aaron noted that sales in the US were lower than expected and were mixed throughout the country with no discernible pattern.

* Total sales in the Asia-Pacific region rose 20 percent to $208 million in the second quarter. On a constant-exchange-rate basis, total sales also rose 20 percent and comparable store sales increased 13 percent, “led by especially strong sales growth in Greater China,” the company said in its report.

* Aaron focused a great deal of time on Japan where the company operates 54 stores. The negative translation effect from a substantially weaker yen caused total sales to decline 14 percent to $136 million in the second quarter. However, he noted that on a constant-exchange-rate basis, total sales increased 7 percent in the second quarter, due to comparable store sales growth of 8 percent with strong growth in engagement and higher-end jewelry categories.

* Total sales in Europe rose 11 percent to $111 million in the second quarter. On a constant-exchange-rate basis, total sales rose 10 percent and comparable store sales rose 7 percent due to sales growth in the United Kingdom and most of continental Europe.

* Sales classified as “Other” sales increased 33 percent to $26 million in the second quarter, primarily reflecting the conversion in July 2012 of five Tiffany & Co. stores in the United Arab Emirates from independently-operated to company-operated. The company said it expected to increase its presence in the Middle East.

Tiffany opened three stores in the second quarter, including its ninth in Hong Kong store. Other openings were in, in Verona, Italy and in Villahermosa, Mexico. The company closed a store in Tokyo, due to the mall the store was in closing for long-term renovations, Aaron said.

The company in the second quarter operated 277 stores (116 in the Americas, 67 in Asia-Pacific, 54 in Japan, 35 in Europe and five in the U.A.E.), versus 260 stores (106 in the Americas, 61 in Asia-Pacific, 55 in Japan and 33 in Europe and five in the U.A.E.) a year ago.

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