Gold Demand +21% in Q1; Jewelry Demand -19%

(IDEX Online News) – Gold demand had its best-ever start to a year in the first quarter or 2016 – rising 21 percent to 1,289.8 tons – according to a report from the World Gold Council.

During the quarter, the US gold price appreciated by 17 percent, sustained by investor conviction, in particular gold exchange traded funds (ETF). This surge was gold’s best performance in almost three decades and ranked the commodity as one of the most successfully performing assets globally in the first quarter.

Increased ETF demand was mirrored in a similarly improved interest in physical demand for bars and coins in a handful of markets.

Gold’s overall strong performance was not reflected in the jewelry sector, where the six-week official jewelers strike forced Indian consumers to postpone first quarter demand. The gold and jewelry industry in India virtually ground to a halt in March, as both and demand and supply nosedived, making for an extremely challenging quarter.

Indian jewelry demand hit a seven-year low of 88.4 tons – a 41-percent year-on-year decline, which also correlates to a 44-percent decrease on India’s five-year quarterly average of 156.7 tons.

Jewelry demand in China also dropped, falling 17 percent in the first quarter to 179.4 tons. In a region that traditionally purchases gold when prices are more stable, appetite for gold jewelry was curbed against a background of continued economic slowdown.

The Chinese market had started quite strongly, in response to demand from the Chinese New Year effect. However, the country’s lowest first quarter GDP performance since 2009 affected consumer confidence, and therefore, retail sales of silver and gold jewelry.

China had the additional burden of a new national hallmarking program, which comes into force on May 4, and requires that all gold jewelry of 99 percent purity be hallmarked. Retailers were involved in stock replacement for much of the quarter, led to a temporary supply squeeze, which intensified the slump in demand.