Gold Demand Trends Full Year 2023

In a year of record high gold prices (in the US dollar as well as many other currencies), global gold jewellery demand managed to secure marginal gains – from 2,089t to 2,093t. In value terms, this translates to 8% growth and a record US$131bn.

China was the main contributor to growth despite the comparison with a weak, COVID-hit 2022. But Turkey and one or two smaller markets also saw y/y gains, helped by the investment motive that often drives high-carat jewellery purchases. Weakness was otherwise fairly widespread, although the magnitude of losses was generally modest given the scale of gold’s price rise.

China

China’s gold jewellery consumption reached 148t in Q4 (+17% y/y), lifting the full-year total to 630t (+10% y/y). The Q4 performance – smack in line with China’s five-year quarterly average – could be considered disappointing as the strong y/y rise was partly due to base effects from a very weak Q4’22.

The removal of COVID restrictions in late 2022 laid the foundations for a 2023 revival in China’s gold jewellery consumption. Gold also benefited from its increasing appeal to consumers as they sought value preservation. Surveys from the People’s Bank of China (PBoC) show that the saving intentions of households hovered around record highs in 2023 and this benefited gold, given its long-held status as a store of value. The strong 2023 local gold price performance further underlined this view and gold jewellery was one of the best performing retail categories during the year.

Additional support came from improved demand for wedding jewellery in the year, amid a rebound in marriages as pandemic restrictions ended.

However, the 2023 total remained below its long-term average and 1% lower than 2019’s pre-pandemic level. And the fourth quarter – typically a strong period for gold jewellery sales – was relatively disappointing according to the trade. The elevated gold price and consumer preference for spending on travel and other forms of entertainment contributed to the somewhat soft fourth quarter. And 2024’s late Chinese New Year holiday also delayed the traditional sales boost associated with this occasion.² 

Products with lighter weights and cheaper unit-total prices were the most popular during the year, in part encouraged by the strong gold price. Our 2023 Chinese jewellery retail market insights found that products lighter than 10 grams, or cheaper than RMB2,000 contributed the most to retail sales. And our conversations with industry participants indicated similar trends: light-weight 24K hard pure gold jewellery and smaller products (with more modest labour charges) outperformed others.

Meanwhile, we have noticed the emergence of the “wholesaler to consumer” sales model, where consumers purchase gold jewellery products direct from wholesalers, thus avoiding additional charges and benefiting from attractive pricing.

Looking ahead, gold jewellery demand in China may face challenges in 2024. While the first quarter is likely to see robust performance, thanks to the traditional Chinese New Year sales boost, the elevated gold price and a potential slowdown in economic growth may exert pressure on gold jewellery demand after this initial lift. Furthermore, 2024 is a less auspicious year for marriages, potentially hurting demand for wedding jewellery. We believe consumers will continue their hunt for products with low labour charges, motivated by value preservation, the high gold price.

India

Fourth quarter demand in India was down 9% y/y, from a relatively elevated Q4’22 base; this contributed to an overall decline in 2023 demand, down 6% y/y to 562t. Arguably, the 6% y/y annual could be seen as robust given the local gold price trend: it price set a number of new record highs throughout the year.

The price strength of 2023 encouraged a trend for lighter-weight or lower-carat items, as well as simply reducing the volume of gold jewellery purchased. The higher margins charged on gem-set and 18k jewellery further encouraged this shift.

During Q4 the October price correction, which coincided with Navratri, encouraged a strong consumer response.³ And Diwali purchases boosted sales in November. But this dried up in December as the price resumed its sharp upward trend, and some reports suggest demand was close to a standstill in the closing weeks of the year.

Indian gold jewellery demand is likely to be subdued in Q1 if prevailing price levels are sustained: retailers are not optimistic for any meaningful return in demand in the absence of a price correction. Moreover, wedding jewellery demand is likely to be tempered given the fewer number of auspicious wedding days in Q1 (16 versus 28 in Q1 2023). There could be pockets of demand in the run up to the general elections (April-May) during which time government spending generally tends to increase, but the outlook is relatively cautious.

Middle East and Turkey

Turkey’s jewellery demand continued to extend its upward trend from the lows seen in 2020: annual demand reached an eight-year high of 42t (+14% y/y). Q4 demand of 11t was 7% higher y/y, the seventh consecutive quarter of y/y growth.

Investment motives remained a key driver of jewellery demand in Turkey, although the new record high prices of Q4 emerged as something of a headwind to jewellery demand, contributing to the q/q decline from Q3.

Nonetheless, the investment case for gold stayed compelling: consumer inflation remained exceptionally high; domestic investors had a lack of viable investment alternatives; and heightened geopolitical tensions shone a spotlight on gold’s safe haven attributes.

Annual jewellery consumption in the Middle East fell 9% in 2023, to 171t. Saudi Arabia outperformed the rest of the region, registering a marginal y/y increase to 38t (+1%y/y). Nevertheless, demand remained relatively subdued as pent-up post-COVID demand was exhausted and the high gold price environment posed a challenge.

Elsewhere, the biggest losses were seen in the UAE (-15%) and Egypt (-17%). The drop in the UAE was mainly due to the high base of 2022, which had been boosted by the post-COVID return of tourism. Egypt, however, was hit by continued domestic economic challenges, notably depreciation of the local currency affecting domestic consumers. Geopolitical tensions and falling tourism also had a detrimental impact.

US and Europe

Annual jewellery consumption in the US continued its downward trend, following two consecutive years of relatively strong demand. Full year demand was 5% lower at 136t, while Q4 demand was down 4% – the seventh consecutive quarterly y/y decline.

Throughout 2021 and 2022 demand was boosted by higher disposable income levels generated by COVID lockdowns and government support measures, but this impact wore off in 2023. Instead, consumers focused their spending on travel, entertainment and experiences. The higher gold price also contributed to lower levels of demand, as did the return to more ‘normal’ marriage numbers, as the post-COVID backlog of weddings cleared.

That said, annual demand was still comfortably in excess of typical pre-COVID levels: the average for 2015-2019 was 124t.

Jewellery demand saw widespread weakness across Europe during 2023; demand at the regional level was down 3% at 70t. Although Q4 saw the traditional seasonal q/q jump, the y/y comparison was less robust, with a 5% drop to 30t. Similar to the US, the decline in consumption was partly a reflection of a post-COVID ‘normalisation’ in demand. While demand at the top end of the market remains more robust, field trip conversations suggest that strength in this segment is not quite as broad-based as previously.

ASEAN markets

A Q4 recovery in Thailand’s gold jewellery demand failed to prevent a full-year decline. Annual demand slipped 2% to 9t, despite a surge in demand during October and November in response to the price dip.

During the fourth quarter higher agricultural prices reportedly sparked an improvement in rural demand, which had lagged the performance of urban demand throughout much of the year. However, jewellery recycling volumes in Thailand climbed during 2023 as the rising gold price drew out existing holdings.

Vietnamese jewellery demand suffered a steep drop in 2023: down 16% to 15t. Four consecutive quarterly y/y declines were a consequence of slowing economic growth and relatively high inflation.

Gold jewellery demand in Indonesia suffered a 12% decline in 2023, bringing an end to the two-year recovery streak. Higher gold prices and pressures from the broader inflationary environment were the main reasons for weaker demand.

Rest of Asia

Japan was one of the more resilient jewellery markets in 2023: demand grew 6% y/y to 16t. Demand was consistently strong throughout the year, with each quarter posting y/y increases. The main area of growth was the quasi-investment ‘kihei’ segment, which benefited from the rising gold price.⁴  In contrast, lighter-weight and lower-carat ‘every day’ designs suffered as a result of rising prices.

South Korean gold jewellery consumption resumed its long-term downtrend: annual demand fell 21% to 12t. Buying during the peak Q4 season generated a healthy q/q recovery from Q3’s paltry levels, but the longer term downward trend remained firmly in place as record local gold prices inevitably weighed on demand.

Australia

Annual Australian jewellery demand posted a 6% decline in 2023. Consumers face pressure from a punishing cost of living and this, combined with gold price strength, generated a y/y drop in demand for gold jewellery. But demand remained comfortably above the 2021 total.