A sharp ascent in gold prices in the second half of 2019 caused a dwindling global jewellery demand - the annual volume fell by 6 percent to 2107t while jewellery demand in the fourth quarter fell to its lowest since 2011 to 584t according to the recent report by the World Gold Council.
China and India were the major contributors to the drop in global volumes. The drop in volumes in the last quarter was 10 percent year-on-year. This was as a result of a sudden price hike in the third quarter which affected affordability.
The occasion of Dhanteras- the first day of Diwali (the Festival of Light), which was on October 25, failed to lift the demand in India while a dip in gold price prior to the November wedding season generated some wedding-related demand. However, volumes were still lower when compared to 2018.
Alternatively, the branded chain stores fared decently as compared to the stand alone stores since they offered promotions and even launched new collections during Diwali and the wedding season. Moreover, the volume of heavy weight jewellery items also remained resilient during high prices substantiating that higher-end sectors were largely unaffected by price alterations.
China’s fourth quarter jewellery demand fell by 10 percent while annual demand recorded a decline of 7 percent. This was essentially owed to global trade disputes, slowing economy, and changing trends with a preference for lighter jewellery pieces by the younger generation. The GDP growth was 6.1 percent while mounting pork prices pushed CPI growth to 4.5 percent. Together these two factors held back jewellery demand as it affected affordability.
Albeit, during the peak season before the Chinese New Year, demand remained inelastic to price changes due to their belief that gold brings luck along with the fact that a lot of companies pay out year-end bonuses before the new year which triggers the willingness to spend.
The supply, on the other hand, grew 2 percent year-on-year in 2019 to 4776t on the back of gold recycling, essentially. Mine production, on the other hand, reduced by 1 percent. Although mine production increased in countries such as Russia, Australia, Turkey, it was offset by the decline in production by the world’s largest producer, China- a drop of 6 percent year-on-year. This was due to stringent environmental limitations. The rate of decline though, has slowed down as the industry began to abide by the new regulations.
According to the website of World Gold Council, the demand for gold in 2020 will be driven by the economic growth and market risk, with factors such as financial uncertainty and lower interest rates in consideration, among others.