The sharp rise in gold prices—which reached levels above $1,000 per ounce in mid March—and unusually high volatility were key determinants in gold demand movements for the first quarter.
Total identifiable demand decreased by 16 percent in tonnage terms from year-earlier levels to 701.3 tonnes, the lowest in five years. However, total identifiable demand actually increased 20 percent in value terms to $20.9 billion, more than double the level of four years earlier.
The market most severely affected by movements in the gold price was India, where consumer demand decreased by 50 percent to 102.1 tonnes. Jewelry demand, at 71.1 tonnes, was half the level of demand in the first quarter of 2007.
Gold jewelry demand in Asia also declined in Japan (-4 percent), Vietnam (-19 percent) and Indonesia (-27 percent).
In contrast, total gold demand in China increased by 15 percent to 101.7 tonnes, with jewelry demand rising 9 percent to 86.6 tonnes. According to the report, continued economic strength allowed Chinese consumers to increase their purchases regardless of the rising gold price.
In the United States, demand declined again as the economic slowdown continued to weigh on manufacturers’ and consumers’ pockets. Overall demand declined 15 percent to 48.3 tonnes, a fall that the report said was fully attributable to a 25 percent decline in jewelry demand that more than outweighed a 91 percent rise in investment offtake.
Gold jewelry demand also declined in Italy (-13 percent) and the United Kingdom (-25 percent), while economic prosperity in Russia spurred consumers there to increase their spending (9 percent).
Demand declined in almost all the countries across the Middle East, most notably in Saudia Arabia (-25 percent), the United Arab Emirates (-19 percent) and the other Gulf countries (-30 percent). Egypt, however, was an exception, where demand increased 15 percent to 18 tonnes.
Jewelry demand for the second quarter of 2008 is likely to remain muted, according to the report, especially in the United States and Western Europe. However, buying opportunities such as the Indian Akshaya Tritiya festival—in which purchasing items considered to be long-term assets, including gold, is part of the tradition—coupled with the Indian and Middle Eastern wedding seasons, are expected to generate additional gold purchasing.
The World Gold Council’s gold demand trends report for the first quarter of 2008 is based upon supply and demand data compiled by GFMS Ltd., a London-based precious metals and research consultancy.