May 03, 2018

WGC: Global Gold Jewellery Demand Flat in Q1 2018; China, US, Turkey, Up; India, Middle East Down

Global demand for gold jewellery was steady in Q1 2018 at 487.7 tonnes (t), as growth in China and the US compensated for weaker Indian demand, the World Gold Council (WGC) said today while releasing its quarterly publication Gold Demand Trends Q1 2018.

China was buoyed by holiday spending, and the supportive economic backdrop improved US demand, though Indian consumers were discouraged by rising local gold prices, the report added.

Overall, the sector remained weak when compared with longer-term historical average levels: five- and ten-year quarterly average demand was 592.1t and 556.3t respectively, WGC said.

Indian jewellery demand was down 12% y-o-y to 87.7t, making this the third weakest quarter in India’s jewellery market for ten years. Demand was affected as a depreciating rupee magnified the rise in the international US$ gold price.

Even though prices were relatively stable compared with year-earlier levels, there was a perception of volatility which restrained consumers from making large purchases, WGC said. Moreover, the number of auspicious wedding days was far fewer: there were only seven auspicious days in Q1, compared with 22 in the same period of 2017.

Official Q1 imports were down by around 50% y-o-y as retailers and fabricators reduced orders in anticipation of a possible reduction in import duties prior to the Union Budget in early Feb, and subsequently, when no duty reduction was announced, meeting demand through healthy inventories built up during 2017.

WGC stated that despite this, Q2 started well, with healthy demand during the April Akshaya Tritiya festival, despite higher local prices compared with last year. Improving macroeconomic indicators suggest a positive outlook for jewellery demand, it concluded.

Among other major markets, jewellery demand in China grew 7% in Q1 to 187.8t – a three-year high. 18 karat K Gold and 3D hard gold jewellery continued to gain market share, with consumers increasingly tempted by the innovative, fashionable, non-traditional designs offered in these categories. WGC also reported that the Chinese industry is optimistic, expecting a recovery in jewellery demand in 2018.

Demand for gold jewellery in the US grew 2% to 23.3t – the highest Q1 since 2009, aided by supportive economic conditions. Online sales again showed strong growth, a trend that is expected to continue. 

Turkey recorded the strongest growth of all markets in Q1: demand increased 19% y-o-y to 9.9t, despite a new record high in the local gold price. In value terms, demand increased by 34% y-o-y to TL1.6bn – above the five-year quarterly average value of TL1.4bn.

Many Middle Eastern markets saw double-digit losses, hit by tax changes, economic pressures and geopolitical concerns. The introduction of a 5% VAT rate on gold jewellery in the UAE contributed to a 23% y-o-y decline. Q1 demand sank to 10.5t, the lowest Q1 in our data series. Consumer sentiment was further undermined by rising living costs and fears over job security.

Across sectors too, WGC reported that total gold demand of 973.5t was the lowest Q1 since 2008. The main cause was a fall in investment demand for gold bars and gold-backed ETFs, partly due to range-bound gold prices.