Jewellery demand will continue to retain glitter

Consumption for January-September 2005 perked up by 12%

Spectacular growth in jewellery demand is partly responsible for the current rise in gold prices in the domestic - as well as in the international - market.

Of total end-use gold consumption of 3,188.1 tonne in 2003, jewellery consumption accounted for as high as 2,477.3 tonne.

In comparison, the figures of end-use consumption and the jewellery segment consumption stood at 3,497.6 tonne and 2,613 tonne, respectively, in 2004.

In the third quarter of the current calendar year, gold consumption by the jewellery segment rose only 2 per cent on high prices and lower interest rates. Total consumption went slightly up to 613.5 tonne against 603.5 tonne in the comparable period last year. 
 

THE SHEEN IS SHOWING End-use gold consumption
(In tonne)	Q2'04	Q3'04	Q2'05	Q3'05
Jewellery consumption	635.8	603.5	728.3	613.5
Industrial & dental	108.6	100.7	111.5	106.8
Electronics	70	63.8	71.6	70.5
Other industrial	21.6	20.1	23.6	19.9
Dentistry	17	16.8	16.3	16.4
Identifiable investment	91.2	75.2	106	117.5
Retail investment	86.4	77.3	107.6	80
Bar hoarding	66.5	58.1	80.9	52.8
Official coin	28.8	25.2	29.6	26
Medals/imitation coin	6.7	7.9	9.8	8.6
Other retail investment	-15.6	-13.9	-12.7	-7.4
ETFs & similar products	4.8	-2	-1.6	37.5
Total end-user consumption	835.6	779.4	945.8	837.8
London pm fix, $/oz	393.27	401.3	427.39	439.72
Source: GFMS Ltd.

Consumption during the January 1-September 30 period of the calendar year perked up by 2226.5 tonne, an increase of 12 per cent, against 1814.7 tonne last year.

Consumers have refrained from placing fresh orders as they see an imminent correction in gold prices in the near future.

At least for the last two years, jewellery consumption normalised in the third quarter as it is rainy season in some parts of the country, but it recovered in the fourth quarter on the back of the festival and wedding season demand.

The consumption touched a new peak of 798.3 tonne in the fourth quarter against 603.5 tonne in the third quarter. So this year too, the jewellery demand is expected to grow about 30 per cent on the lines of the growth seen in the last quarter of the previous year.

The recovery in jewellery demand continued in the third quarter of the current year though the year-on-year growth in tonnage terms was a relatively modest 2 per cent after the very strong growth experienced in the first half of the year.

After the first two quarters of the current calendar year saw almost all major markets demonstrate strong growth, the pattern Q3 showed was a mixed one - demand in some countries continued to surge ahead, while the same in others paused for a breather.

The underlying causes of the increase in jewellery demand - good economic growth and sustained promotion - remained intact in most markets, but the price movements were not quite as favourable as in the first half year. The dollar price was on an upward trend during better of the quarter.

Despite this, during most of the July-August period, price levels remained within most consumers' comfort zones, but the sharper rise in the second half of September discouraged buying in some markets.

Nevertheless, with a 10 per cent price hike, even the modest 2 per cent increase in the tonnage terms produced a substantial 11 per cent rise in the dollar terms.

Demand in the twelve months to September 2005, therefore, reached $39.2 billion, exceeding the record set in the 12 months to June. The upward trend in the jewellery demand remained firm in place.