Figures released today by the World Gold Council (WGC) showed global demand for gold jewellery reaches a record $14.5bn, 37% higher than Q2 2006 with particular strength across the key gold markets in the world. The figures, compiled independently for WGC by Gold Fields Mineral Services Limited (GFMS), showed total identifiable demand made a substantial recovery in Q2 2007 from the impact of the volatile prices experienced in 2006, rising 19% in tonnage terms on Q2 2006, and reaching $19.8 bn a 27% increase, in value terms year on year. Total demand reached 922.0 tons.
Net retail investment increased by 51% in tonnage terms to 132.9 tonnes and 60% in dollar terms reaches $2.9bn, compared to Q2 2006. Investment in Gold-Backed Exchange Traded Funds (ETFs), was negative over the quarter, with small net redemptions of 2.6 tonnes. Total identifiable investment fell just 4.8% in tonnage terms and increased 1% in dollar terms at $2.8bn, compared with Q2 2006. Total identifiable investment reached 130.4 tons.
Industrial demand was up slightly on Q2 2006, 2% higher in tonnage terms to 116.5 tonnes; and 9% up in dollar terms to 2.5bn, a new quarterly record. Electronics demand, which grew strongly in 2006, also recorded a further 2% increase in tonnage compared to Q2 2006.
Overall demand in the Middle East region (Saudi Arabia, UAE, Kuwait, Bahrain, Oman, Qatar & Egypt) was 20% to 97.5 tonnes higher than the depressed levels of the same quarter in 2006 (jewellery demand increased by 21%, net retail investment increased 9%). The increase was due to strong economies and stable prices in this region.
Demand in UAE, was strong with Q2 consumer demand 15% above as compared to year-earlier and jewellery demand 18% higher. This is because of the economy remained very strong and tourist numbers continue to grow – especially towards the end of quarter two when the Dubai Summer Surprises Festival has started. Total gold demand in UAE in Q2 reached 29.8 tons.
In Saudi Arabia (the fifth largest jewellery market) consumer demand was 30% higher than in Q2 2006 (jewellery up 30%, net retail investment up 30%), equivalent to a 38% increase in dollar terms. Demand by Umrah pilgrims and tourist in Q2 2007 saw a good Umrah & holiday seasons. The current promotional campaign “Miss L’Azurde” run by L’Azurde in partnership with the World Gold Council has been noted as being particularly successful; furthermore, the decision at the end of March to reduce duty on imported jewellery from 12% to 5% also starting to improve the product offering; also, the impact of the wedding season which runs from mid-May to Mid-July and makes Q2 a seasonally strong quarter. The combination of all these elements should continue to support demand in Q3, which should therefore see further recovery, always provided the price remains relatively stable. Around 400 gold & jewellery outlets are participating in the Jeddah Gold Shopping Festival. An under lying supportive factor is that stock market euphoria is no longer diverting the attention of trade and consumers as it did prior to last year’s crash. Total gold demand in Saudi Arabia in Q2 2007 was 42.5 tons.
In Kuwait, Bahrain, Oman and Qatar, total demand was 12.0 tons – a total increase of 15% in tonnage year-on-year.
In Egypt, market is fundamentally strong, and economic trends continues in the second quarter including tourist numbers have been positive. Consumer demand was 9% higher as compared to year-earlier and jewellery demand 8% higher. Total demand in the Egyptian market reached 13.3 tons in 2007.
Demand in Turkey was very strong in the Q2 particularly in May and June; in addition the government pumped extra money into the economy ahead of the July election boosting consumers’ purchasing power. As a result, Turkey enjoyed second-quarter record for both jewellery demand, at 52.2 tonnes and net retail consumption, at 20.5 tonnes, an increases of 14% and 5% respectively on the previous quarter. Total gold demand in Turkey in the first quarter 2007 was 72.8 tons.
Commenting on these figures, Moaz Barakat, World Gold Council’s Managing Director in the Middle East, Turkey & Pakistan, said: “We are pleased to report a very strong second quarter with demand for gold reaching unprecedented levels in a number of markets. A reduction in price volatility in 2007 has resulted in increased consumer confidence and, coupled with greater industry marketing activity, led to record levels of gold jewellery purchases in the region and globally in dollar terms.”
Mr. Barakat added: “The results of World Gold Council’s activities and projects in the region especially in the Gulf countries where excellent as per the latest market researches to measure the impact. Such activities has increased the awareness of the importance of gold among the consumers as gold, specially gold jewellery is more than a precious life style product; it is a genuine and elegant expression of feelings that develops with the modern life in the form of fashionable, modern and classy products, which at the same time a store of value.”
Demand in main countries in the world:
The world’s largest gold market, India, total demand for gold in Q2 2007 was equivalent to half the global mine output for the quarter. More stable gold prices, a booming economy and the increasingly successful festivals in April all contributed to a strong second quarter despite prices being in the mid-$600/oz .Total consumer demand reached 317.2 tonnes.
In China, strong economic growth, reduced price volatility and the auspicious new Chinese year saw China’s gold demand increase by 32% in tonnage terms as compared to year-earlier. Total gold demand in China in Q2 2007 was 75.9 tons.
In USA, third in the world in gold demand, the gold jewellery demand was 4% lower than a year-earlier in tonnage terms, equivalent to a 2% rise in dollar terms. The high gold price continued to divide the market; buying remained strong, often very strong, at the middle and high end, particularly when the goods offered were innovative and with good design. In contrast, the mass market was suffering with consumers who are income-constrained now finding the metal too expensive. Total gold demand in USA in Q2 2007 was 52.0 tons.
On the other side in Russia (the report covers first time); jewellery demand has grown steadily over recent years, consumption increased by 27% to 20.3 tonnes compared with Q2 last year.
Gold supply remained constrained in Q2. Stable prices reduced the supply of scrap, and this served to offset increased central bank selling. Mine production increased by 3% from year earlier levels. The pace of selling under the Central Bank Gold Agreement (CBGA 2) picked up during the quarter reaching 152 tonnes. Scrap supplies fell 27% from the exceptionally high level of one year earlier.
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