Gold Demand in H1 Highest on Record; Jewelry Demand -14% in Q2 (7-Year High in U.S.)

17/08/2016 11:42

Record high prices for gold (the price of gold rose 25% in the first half of 2016, its strongest performance in 35 years) has led to a record surge in H1 investment demand of 1,063.9t, which was 16% higher than the previous H1 high from 2009, as continued growth in Q2 2016 (+15%) brought total H1 gold demand to 2,335t - the second highest first half on record, according to the World Gold Council. On the other hand, WGC writes that, "The high price level has taken its toll on the jewelry sector," leading to a 14% decline in gold jewelry demand for the second quarter of 2016 - the lowest quarterly total since the second quarter of 2010. There were a few notable exceptions, including the United States, where gold jewelry demand hit a seven-year-high after logging its 10th consecutive quarter of annual growth. 

Concerning the high and volatile price of gold, WGC writes, "Coming at a time when consumer confidence is at low levels in many markets has exacerbated its impact. India and China had the most influential impact on demand, although demand across many markets was subdued." Indeed, the two largest gold jewelry markets in the world, India, and China, led the decline along with the Middle East. Meanwhile, the U.S. continues to show improvement, along with Iran. The dollar value of gold jewelry demand for the first half of 2016 was the lowest since 2010, at $36.3 billion. The high price of gold also has led to a substantial increase in gold recycling. In the first half of 2016, gold recycling generated 686.7 tons of supply, the highest first-half total since 2012.

Concerning the seven-year high in US H1 jewelry demand, the WGC report states: "Although the market was somewhat subdued ahead of the forthcoming Presidential elections, Mother’s Day sales helped US jewellery demand to its 10th consecutive quarter of year-on-year growth (+1% to 25.9t). Demand for the first half year of 48.6t was the strongest since 2009. Growth in jewellery and watch sales comfortably outstripped that of general retail sales for much of the year-to-date, although the comparison was slightly flattered by weak gains in early 2015. Consistent, if moderate, economic growth and improving employment levels are supporting demand, although enthusiasm in the sector can be expected to wane over the coming months as the elections draw nearer." As concerns Europe: "European jewellery markets have also been relatively subdued so far this year. Despite the higher gold price, stabilisation or modest growth was the norm as economies continue to recover and the high-end of the market continues to grow. France was an exception; demand slipped marginally to 2.5t (-2%) as consumers continued to shift from gold to silver."