U.S. gold jewelry demand decreases in 2007

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U.S. gold jewelry demand decreases in 2007

February 13, 2008

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London—A 4 percent increase in gold demand coupled with a price that raced toward the long-held $850 per ounce record, created a record-breaking $79 billion demand for gold in 2007, the World Gold Council (WGC) reported.

Specifically for gold jewelry, demand increased 6 percent in tonnage terms and 22 percent in dollar terms in 2007, creating a record $54 billion demand compared with 2006.

In the fourth quarter, however, rising and volatile prices caused gold jewelry demand to fall 17 percent in tonnage terms and increase 6 percent in dollar terms.

"On a yearly basis, we have seen a 4 percent tonnage rise in identifiable demand for gold and record levels of demand in dollar terms, which is pleasing," WGC Chief Executive Officer James Burton said in a media release. "However, high and volatile gold prices in recent months have meant we have now entered a period of challenging trading conditions in the gold market, which have heavily impacted consumer demand for gold especially in the jewelry and retail investment sectors."

In the United States, which was negatively impacted in 2007 by a weak economy, poor retail environment and record gold prices, gold jewelry demand decreased 14 percent compared with 2006.

The drop in gold jewelry demand was more pronounced in the fourth quarter, with a 17 percent decrease compared with the same period in 2006. In dollar terms, however, this represented a 6 percent increase.

The WGC reported that the U.S. high-end jewelry market was more resilient to the downturn in fourth-quarter gold sales than the mass market, but still experienced a lackluster holiday season.

In India, the world's largest and most sensitive gold market, gold demand was 7 percent higher in 2007 than in 2006, but took a hit in the fourth quarter, falling 64 percent.

Gold demand in China, however, reached 326 tonnes in 2007, a 26 percent increase above 2006 levels. The country has now overtaken the United States as the second-largest volume retail market for gold jewelry after India, with demand for jewelry reaching 302 tonnes, surpassing 300 tonnes for the first time since 1997.

Turkey also witnessed a record overall demand for gold in 2007. Up 14 percent to 188 tonnes, it was the second-highest annual figure ever.

In Russia, gold jewelry demand rose 11 percent, setting another annual record. Growth remained vibrant throughout the year, with demand in the fourth quarter nearly 25 percent higher than the same period in 2006, making Russia the fastest-growing gold market for the quarter.

Burton said gold jewelry and retail investment demand is unlikely to be strong in the first quarter of 2008. But he also believes gold's desirability to consumers and investors alike remains very strong and, once prices stabilize, buyers will come back to the market.

The report suggests, however, that the real danger to gold jewelry demand would come from a period of prolonged volatility, especially at record high price levels.

The WGC's "Gold Demand Trends" includes figures compiled independently by GFMS Ltd.

For more information about the WGC, visit its Web site, Gold.org.

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