Gold Demand Trends Q1 2022

Q1 gold jewellery demand of 474t was relatively soft, particularly when compared with the bumper previous quarter.¹  But much of the decline can be accounted for by China and India, which together tend to generate between 55-60% of total quarterly jewellery consumption. Demand elsewhere was relatively robust, particularly in the Middle East and Europe; excluding China and India, jewellery demand was 7% higher y-o-y.

Jewellery fabrication was slightly more resilient, declining by 4% y-o-y to 518t. As a result the market saw a build-up of inventories during the quarter (+46t), as consumer demand failed to match expectations. 

Although jewellery demand continued to hold above the weak levels seen during the worst of the pandemic in 2020, it has yet to recover to the sort of pre-COVID volumes that were the norm in most markets. A comparison with 2019 levels reveals that, with a few exceptions, demand in the most recent quarter is weaker than that of Q1’19 – most notably in India and the smaller markets in Asia. The market has yet to ‘normalise’ following the shock of the pandemic, and the subsequent rise in gold prices may slow its recovery.

China

After a promising start to the year, Chinese gold jewellery demand in the first quarter fell 8% to 178t. All things considered, the first quarter was in fact relatively robust, holding comfortably above the Q1 five-year average of 154t and only 6t below its average for the last ten years. But the y-o-y decline was unavoidable in the context of:

• high and volatile gold prices
• the comparison with a very strong base period in Q1 2021
• the introduction of lockdown measures to combat a fresh outbreak of COVID-19.

January and February saw upbeat sales for gold jewellery in China, lifted by festival sales ahead of the New Year Holiday; volumes were also boosted by the continued efforts of retailers to promote heavier gold products.

But the sharp rise in the gold price in late February following the outbreak of war in Ukraine impacted demand. As strict lockdowns were imposed in March across key cities such as Shanghai and Shenzhen, demand all but halted.

The first quarter saw a continuation of trends from 2021 in China’s gold jewellery market: notably, heritage gold jewellery continued to gain market share. Holiday sales related to the Chinese New Year provided a boost for these products, as they embed traditional Chinese culture in their designs. The quarter also saw continued adoption of ‘per-gram’ pricing among retailers, alongside a continued push to market and promote heavier products, to secure higher margins.

Looking ahead, the prospects for the second quarter are fairly ominous. The usual seasonal Q2 decline is likely to be exaggerated by the negative impact on jewellery demand of continued lockdown restrictions, as well as by China’s economic slowdown. 

India

Having reached a record high in Q4’21, jewellery demand in India fell by 26% y-o-y in Q1 to 94t. The lack of auspicious gold-buying days and wedding days in January was followed by a sharp rise in the gold price in late February/early March – a combination that proved detrimental to jewellery buying.

The gold price breached the key psychological Rs50,000/10gm at the end of February, before rising to above Rs53,000/10gm in March. In response, consumers postponed gold purchases, hoping for a price correction…or at least a stabilisation. Sluggish demand in March resulted in the local market discount widening as far as US$60/oz – its highest for 18 months.

The outlook for Q2 demand in India is positive, although further increases in the gold present a downside risk to demand. Demand in the second quarter will receive support from festival purchases (Akshaya Tritiya – a key gold-buying festival – falls in the first week of May) and wedding season buying. Underlying consumer sentiment is improving, which should also prove supportive: the Reserve Bank of India’s Consumer Confidence Index increased to 71.7 in March from 64.4 in January. However, demand could face headwinds should there be further increases – or heightened volatility – in the gold price, while broad-based inflation may also curb demand by squeezing disposable incomes.

Middle East and Turkey

Jewellery demand in Turkey saw a repeat performance of its poor Q4 performance. Demand was 17% lower y-o-y at 7t, as currency weakness magnified the impact of gold price rises and discouraged consumers. The average monthly lira gold price hit the highest on record in March at TL920/g. At a time when Turkish consumers are already battling with rampant local inflation and falling incomes, it comes as little surprise that gold demand languished.

In contrast, regional demand in the Middle East extended its recovery from the pandemic-induced slump of 2020, recovering to its highest level since Q1’19. Regional demand was 18% higher y-o-y at 47t. The biggest contributors to the region’s growth were the UAE and Iran. In the UAE, jewellery consumption jumped 50% y-o-y to 12.5t. This was the strongest quarter since Q2’17, as demand benefited from attendees attracted by Dubai’s Expo, while the lifting of all COVID restrictions and higher energy prices buoyed domestic consumer sentiment. Demand in Iran was 41% higher y-o-y at 8.4t. Continued optimism over a new nuclear deal lifted consumer sentiment, as did high oil and gas prices.  
 

The West

Gold jewellery consumption in the US was flat y-o-y in Q1 at a very healthy 26t. Demand likely continued to benefit from high savings and restrained spending on travel, which has yet to return to pre-pandemic levels. And weddings – which represent a cornerstone of gold jewellery demand in the US – are expected to resume in earnest this year.

However, demand seems to have faded in March as high inflation and energy prices started to bite. The impact of gasoline prices at the pump are likely to have had a considerable impact on consumer confidence, particularly as they coincided with the final phasing out of most of the federal income support programmes. 

European gold jewellery demand saw a strong y-o-y recovery, although remained below pre-pandemic levels. Demand increased 14% to 11.3t, largely encouraged by the broad economic recovery, the continued lifting of restrictions compared with Q1’21, still-limited expenditure on travel and the re-start of weddings. But gains were likely curtailed by the Ukraine crisis, which dented consumer confidence, as well as by the indirect impact of rising energy prices constraining disposable income. The UK witnessed the highest growth rate in the region, increasing by 33% albeit that volumes remained very low at 2.7t. Strong y-o-y growth in hallmarking data confirms the positive Q1 picture for the UK.
 

ASEAN markets

Q1 jewellery consumption in Indonesia fell by 7% y-o-y to just under 6t. Domestic jewellery demand has been impacted by the spread of the Omicron variant; daily infection rates reached their highest in February, leading to the re-introduction of limited social distancing measures in some areas. The outlook is more positive as the case rate is now falling and festive buying in Q2 is likely to support demand. 

Although still below pre-pandemic levels, jewellery demand in Thailand rose to a little over 2t, an 8% increase y-o-y. A reopening of the economy and the resumption of tourism has supported demand, although consumers are still holding back on big-ticket purchases. 

Jewellery consumption in Vietnam has started to recover, growing 10% y-o-y to nearly 6t. This is the first y-o-y increase following the last two quarters of y-o-y decline, and the highest first quarter for Vietnam since 2007. Festivities including the New Year celebrations in February, Valentine’s Day and the God of Fortune Day supported the recovery, as has the recovery of business activity to pre-COVID levels. This is reflected in a robust GDP growth figure of over 5% in the first quarter. 

Jewellery demand in Singapore grew 18% y-o-y to nearly 3t. This is the highest quarterly figure since Q4 2019. The further easing of restrictions and increased consumer confidence will have boosted demand for jewellery.

Despite higher gold prices, jewellery demand in Malaysia rose by 23% y-o-y to over 3t. This was 20% higher than the five-year quarterly average, but the growth rate partly reflects the lower base in Q1 2021, when COVID restrictions were significantly impacting demand.

Rest of Asia

Jewellery demand in Japan increased by a modest 5% y-o-y to 3t, despite the notable increase in average price levels since Q1’21. Jewellery consumption exceeded expectations with TV and online sales supporting the jewellery market. However, the comparison is being made with an already weak Q1’21, and demand remains considerably below the five-year quarterly average of 4t.

Jewellery demand in South Korea declined by 13% y-o-y to just over 4t. This is mainly due to higher gold prices deterring consumers. A spike in COVID cases in Q1, as the Omicron variant took hold, dampened consumer sentiment. It should be noted that by the end of March virus cases had declined significantly and the country is on course to remove most of this remaining restrictions.

Australia

Jewellery demand in Australia increased 40% y-o-y to almost 3t. Australia’s economy was one of the fastest growing in the region (and the G20) in Q1, which will have boosted domestic economic sentiment – a big driver of demand. The recent reopening of Australia’s borders will further assist the economic recovery and likely support jewellery demand going forward. This is the first time the Australian jewellery market has been included in GDT; our estimates suggest that 8.2t of gold jewellery was purchased in 2021.