WGC: Jewelry Demand to Pick Up


"Investors are realizing the high prices might be here to stay."

Despite gold's high price, jewelry demand will pick-up in India since investors are realizing the high prices might be here to stay, said Jason Toussaint, Managing Director, U.S., of the World Gold Council on Wednesday.

"If we are at $1,250 an ounce and it went up rapidly to that number, you would see a dramatic impact on jewelry demand. Although we have had a decade of increasing gold prices, there seems to be a steadying out or a little bit less positive volatility to the gold price at this point-in-time, which gives people the understanding that maybe these prices are here to stay," he said.

Wednesday, the WGC said in its second quarter gold trend report that jewelry consumption fell 5% from year-early levels to 408.7 metric tons in the second quarter of 2010. Jewelry demand suffered because of rising prices as investors sought the safe-haven of the yellow metal because of global economic concerns and jitters about the European debt situation.

India, the largest jewelry consumer, saw demand down 2% at 123 tons. The WGC admits this tonnage amount historically is relatively low. However, the council said if it is measured in local currency terms the demand value is much higher for India and China.

"If you look and measure that in rupee terms, expenditure on gold jewelry was up 20%," said Toussaint.

With the Indian marriage season coming up as well as important festivals, the WGC anticipates gold demand will remain robust throughout 2010.

Jon Nadler, senior metals analyst for Kitco Metals said last year's high gold prices did not help jewelry sales.

"In the wake of similarly high prices in the first quarter of 2009, India along with Turkey, another pivotal gold consumer, both turned into net exporters of gold due to scrap re-sales," Nadler said.

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