30 April, 2024
| Tonnes | Q1'23 | Q1'24 | Year- on-year % change |
|
| World total | 488.9 | 479.0 |
|
-2 |
| India | 91.9 | 95.5 |
|
4 |
| China, P.R.: Mainland | 195.6 | 184.2 |
|
-6 |
Source: Metals Focus, World Gold Council
Global demand for gold jewellery in Q1 came in at 479t, around 3% above the first quarter average from the past five years of 465t.
While gold jewellery volumes were slightly lower than Q1’23, the value of demand confirms that consumers were far from reluctant to spend on gold jewellery even as prices shot up.
The US dollar value of global gold jewellery consumption in Q1 was 7% higher y/y at US$32bn – the highest value for a first quarter demand since 2013 (when volumes were far in excess of recent levels).
Q1 was a tale of two halves: a positive January and February versus a very weak March. The relative stability in the gold price during the first two months of the quarter aided demand during that period: by mid-February, the US$ price had undergone a gentle price pullback of around 4%. Given that this occurred in the lead-up to the lunar New Year it was well-timed to attract jewellery consumers in Asian markets. However, demand collapsed in March as the gold price rocketed and in some markets this resulted in a negative y/y comparison.
Gold jewellery demand in China totalled 184t in Q1 – 6% lower y/y compared to a very strong Q1’23. Nevertheless, demand was 13% above the ten-year average of 162t as demand held broadly in line with levels that were typical in the years prior to the pandemic.
The quarter was something of a roller-coaster ride for Chinese gold jewellery sales. For many wholesalers and manufacturers, January was their busiest start to a year on record thanks to seasonal spending before and during the Spring Festival; the modestly lower gold price; the popularity of items marking the auspicious Year of the Dragon; and continued focus on gold jewellery as a means of wealth preservation given the weaker currency and stock markets. This strength carried over into February, aided by the Chinese New Year (CNY) sales boost and continued price stability.
But March was a different story – demand fell off a cliff due to the double whammy of a sudden gold price surge and the typical seasonal post-CNY lull. Given the comparison with a very strong base period last year, this generated the net y/y decline. Nevertheless, in value terms, jewellery demand surged to almost CNY90bn, second only to the CNY92bn total seen in Q2 2013 – an unparalleled quarter in Chinese jewellery demand, amounting to 327t.
24K hard pure products and Heritage gold jewellery continued to outperform other categories in Q1. This was helped by the industry’s design innovation: the touch of various gem and diamond inlays has boosted the popularity of these products. Meanwhile, 18K and 22K products lost further market share to higher carat items, especially as consumers pay increasing attention to gold jewellery’s financial value. In general, consumers reacted to surging prices by showing a preference for light-weight items with lower cost, as well as seeking products with lower labour charges.
March demand weakness has so far continued into Q2. Our field research indicates that continued successive record highs in the local gold price during April have kept consumers on the sidelines and retailers cautious in restocking ahead of the traditionally lively Labour Day Holiday. The slowdown in consumer demand led to the retail sector reining in its network expansion plans: store openings will likely be reduced in the coming months.
The fact that Q2 is usually an off season for gold jewellery consumption is likely to create further pressure on demand. That being said, we expect 24K hard pure gold products to outperform other categories thanks to their lighter weights that translate into cheaper unit-total costs and suitability for summer wear.
Gold jewellery demand in India was 95t, 4% above comparatively weak Q1’23. India’s continued strong macroeconomic environment was supportive for gold consumption. Rural demand is now seeing similar growth to that of urban India; in recent quarters it lagged behind as it struggled to shake off the effects of the pandemic.
The early improvement in demand was evident in the local gold price, which moved to a premium in late January until late February, before reverting sharply to a sizable discount in March as the surging price choked off demand. The prospect of impending elections likely further contributed to the March slowdown, as gold consumption tends to decline during these periods.
In response to the higher prices, 18K diamond jewellery saw some improvement, as did jewellery with coloured gemstones. Recycling activity also increased in reaction to the price rise, as is typical in price-sensitive markets like India.
Demand remains weak so far in Q2, reflecting continued record highs in the gold price. Stock-building in preparation for Akshaya Tritiya and the forthcoming wedding season are reportedly muted. But in contrast to China’s conservative retail expansion, large retailers are apparently maintaining expansion plans and continuing with aggressive marketing campaigns. While seasonal factors may support demand in value terms, the prospects for gold jewellery volumes will be muted if the price sees further fresh record highs, particularly as elections will likely impact the sector.
Jewellery demand in Turkey posted its eighth consecutive y/y gain: demand was 19% higher at 11t. This was the strongest first quarter for jewellery demand in the country since 2015. But the growth in demand volume pales in contrast with the value measure: the local currency value of gold shot up to an unprecedented TRY23bn, more than double the Q1’23 total and 19% higher than the record set in the previous quarter.
Investment motives continue to fuel gold jewellery demand in this high-carat market, among them: official CPI of over 68%; global and regional geopolitical tension; negative real interest rates, and a lack of viable alternative investments.1
With no current end in sight to this backdrop, demand is likely to remain robust, albeit that continued record highs in the price may stifle continued strong growth of the scale seen in recent quarters.
Jewellery demand for the Middle East region was 4% lower y/y at 42t in Q1. Weaker demand in the UAE and Saudi Arabia outweighed an improvement in Egypt. The high gold price environment was reportedly the reason for the y/y declines in the UAE (-10%) and Saudi Arabia (-12%). In contrast, Egypt (+3% y/y) saw local gold prices fall in Q1 as the local currency strengthened after the country secured bailout funding from the IMF. Demand in Iran was flat y/y as the impact of rocketing local gold prices offset continued safe-haven-driven buying.
The US market fell by a modest 2%, its eighth consecutive y/y decline as gold jewellery consumption continued to ‘normalise’ following the bumper years produced by the pandemic. Q1 demand of 25t was nevertheless healthy compared with first quarter volumes typical in the years prior to 2020 (the Q1 average for 2010-2019 was 22t). And in value terms, demand of US$1.6bn was the highest for a first quarter in our US data series.
The resilience of the US economy and labour market have lifted consumer sentiment, which in turn has cushioned demand. Further evidence of this came in the lack of any notable shift towards lower carat items. In fact, field reports suggest that heavier pieces continued to sell well.
At the trade level, the first quarter witnessed heavy restocking after inventories had been run down during 2023 due to a combination of recession fears and an unexpectedly strong and late Q4 holiday buying season. The latter explains a slight upward revision to our Q4’23 US jewellery consumption data (from 48t to 49t).
European jewellery demand edged lower in Q1, declining by 2% y/y to 11t. Similar to the US, the decline was in part due to continued normalisation post-COVID. Germany saw the largest decline (-11% y/y), not helped by the shaky economic backdrop undermining consumer sentiment.
Thailand, Vietnam and Indonesia experienced similar y/y declines in Q1 jewellery demand, down by 10% – 12% as the late Q1 gold price rally choked off demand in March.
Thailand’s 10% y/y decline in gold jewellery demand to 2t was a price response: demand slowed sharply as prices started to rise in March. Thailand also saw a sharp rise in recycling activity, albeit remaining below levels seen during the pandemic.
Q1 gold jewellery demand in Vietnam registered a fifth consecutive y/y decline. Demand was 10% lower at 4t, the lowest first quarter since 2015. Despite a flurry of demand in February around the Vietnamese New Year celebrations and God of Fortune Day, demand was heavily impacted by the high price of gold.
Indonesia posted a 12% y/y decline to 5t. The rise in gold prices reportedly boosted demand for lower carat jewellery, including 16- and 12-carat pieces.
Japan showed continued resilience, with the strongest first quarter of gold jewellery demand since 2019. Demand was 7% higher y/y at just over 3t. Meanwhile, the local currency value of demand jumped 32% y/y to JPY32bn – the highest value for a first quarter in our data series.
In South Korea, gold jewellery consumption increased by 3% y/y to 3t. This was the first quarter of y/y growth since Q4’21 and came in spite of the historically high price rise in March.
Q1 jewellery demand in Australia weakened by 15% y/y. The picture remained much the same in this quarter as in Q4’23. Consumers remained under pressure from a challenging macroeconomic environment, which, together with rising prices, undermined demand.
