The gold price drove demand for jewellery 21% down in the second quarter of this year compared to the second quarter of 2007. This came as the gold price remained high and volatile and inflation spread across the world.
The World Gold Council (WGC) said in its Gold Investment Digest that although jewellery demand recovered from the depressed levels of the previous quarter to reach 504.5 tonnes in the second quarter, it was still significantly lower than it was in the same quarter a year earlier.
The Digest said the primary factor driving demand lower during the quarter was the gold price. The volatile price had the “most notable” effect in India, the world’s largest market for gold jewellery.
Demand was also hampered by inflation, which had started to spread across the globe and slowing economic growth in many countries. Consumers were finding their disposable incomes increasingly constricted by rising household costs as food and fuel prices spiralled.
“This has weighed on consumer confidence, compounding the effect on gold jewellery demand as spending on discretionary items is reined in,” said the Digest.
The Digest added that anecdotal reports from its regional office in Mumbai and preliminary data on Indian imports showed there had been a strong revival in Indian demand in the third quarter and widespread reports of shortages of gold in the retail sector.
Full information on jewellery and industrial demand for gold in the third quarter, will be released in mid-November.
Second quarter demand for gold in industrial and dental applications showed a modest decline on second quarter 2007, falling 5% to 111.8t.
The Digest said the sharp economic downturn in the United States, coupled with rising global inflation and a weaker global economic outlook led to lower consumer spending on non-essential items, which helped to explain the lower demand in this sector.
Mine production also declined by a further 4% year-on-year in the second quarter to 590t – bringing production in the first half of the year to 1,133t – 6% lower than production in the first half of 2007.