2008 Gold Market Trends

Source:

"The most compelling reason for the rise in jewelry demand was the price movement during the quarter."

India enjoyed buoyant sales during the mid-October Diwali festival and as the country entered the main wedding season, which runs from October to January. Imports into India (a good proxy for overall demand, as India mines only a very small amount of gold domestically each year) rose by 36% year-on-year in October and November. Western demand for jewelry is likely to have remained subdued in Q4, as consumers continue to adjust their spending patterns to take account of the past year's wealth destruction. Separately, central banks have sold 48 tonnes of gold so far in the final year of the central bank gold agreement (CBGA2).

The third quarter witnessed a recovery in global jewelry demand after three quarters of relative weakness. Demand jumped 27% from Q2 to 647.6 tonnes. A comparison with Q3 07 reveals a more subtle rise of 8%, although in dollar terms this translates into a 38% increase.

The rise in jewelry demand was by no means universal, however, as strong rises in some countries—notably India (+29%), the Middle East (+15%) and China (+10%) were partly offset by large declines among other countries, most notably the U.S. (-29%).

The most compelling reason for the rise in jewelry demand was the price movement during the quarter. Consumers across many countries were eager to take advantage of more affordable gold prices, especially in India where lower local gold prices, as well as a feeling of enhanced wealth among the rural community following a good monsoon rainfall, brought consumers flocking to the market.

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