Published last week, the Thomson Reuters GFMS Gold Survey 2013 provided an outlook on the overall gold market for 2012. The 124-page study is broken down into four categories – 27 pages dealing with fabrication, including jewellery fabrication (manufacturing).
According to the study, gold manufacturing fell for the second year in a row, this time by 5.3 per cent. The figure was attributed to reduced jewellery demand. Gold jewellery production, excluding the use of scrap, fell further, declining by 7.7 per cent.
Markets weaken
Much of the decrease in demand last year was attributed to a decline in India, which represented almost 50 per cent of the year’s total gross losses, the report said. Jewellery manufacturing in that country also decreased for the second consecutive year, falling by another 7.3 per cent. A 24 per cent rise in the rupee gold price was reportedly the main reason for the decline.
Jewellery manufacturing in India is currently projected to drop by another 10 per cent in the first half of this year, taking volumes to a four-year low.
In Europe, jewellery manufacturing fell by 7 per cent, which was driven primarily by less demand in Italy, where jewellery off-take continued to decline, chiefly in response to higher gold prices. While still reporting a weakened demand, Switzerland and Germany posted more modest results, due to strong results in the top end jewellery and watch categories.
US jewellery consumption in 2012 reportedly suffered its 11th consecutive fall but at a far slower pace of 6 per cent. While it is still the third largest market worldwide, the gap between the two biggest, India and China, is quite considerable and the difference with fourth-placed Russia is rapidly narrowing.
The report also highlighted that high gold prices had led to an increased demand in silver in the US. Silver jewellery imports increased by a double-digit percentage last year, while gold fell by 5 per cent. Other base metals such as cobalt and brass also gained in popularity. According to the report, this appeared to be more price- than fashion-led as a fair portion of pieces were plated with gold or silver.
Stronger performance
China is still reporting positive results in gold jewellery manufacturing – if the country was excluded from the global total, demand elsewhere would have decreased by 5.7 per cent (instead of 4.2 per cent).
Chinese jewellery manufacturing increased by 0.6 per cent. While still a positive result, this was the smallest gain in more than a decade. Unstable gold prices, weaker economic environment and low western consumption have all been labelled as contributing factors.
Jewellery manufacturing in East Asia dropped by 1 per cent due to solid demand in China. Excluding China, the decline was a more notable 6 per cent.
Also reporting strong results was Russia, where jewellery off-take continued to approach pre-crisis levels.
Trends in emerging markets
Traditionally, most emerging markets purchased jewellery based on investment rather than design. The report states, however, in recent years many developing nations have seen the emergence of designs similar to those in western countries.
This trend is relatively new in the Indian market, and is said to rest upon factors including the rising young, urban population and the higher disposable incomes among women.
According to the report, jewellery consumption in East Asia has already demonstrated growing signs of maturity, with clear signals that consumers are searching for more western style designs.
Rising gold prices have heavily influenced the move, although a change in taste among the general public and a rapidly emerging middle-class have also accelerated the migration away from traditional plain, heavy, high-carat and low labour mark-up pieces.
According to Thomson Reuters GFMS, most of the
information used in the study was sourced from visits to the countries concerned and discussions with local traders, producers, refiners, fabricators and central bankers.