InvestorQ : Is it true that the demand for gold jewelry is falling sharply in 2020?
Anu Biswas made post

Is it true that the demand for gold jewelry is falling sharply in 2020?

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Neelam Naik answered.
1 month ago

If you go through the latest WGC report you will find that overall demand for gold is down 6% at 2076 tons in the first half of 2020. That is OK considering that gold prices are at an all time high. So the 6% fall in gold demand is fine. But, what is really surprising is how the jewelry demand for gold has fallen so sharply in a way not seen in 20 years.

In the last 20 years, average gold consumption for jewelry purposes has been over 1100 tons in the first half. That fell drastically to just 572 tons in the first half of 2020, the lowest in 20 years. Even back in 2011, when the price of gold was above $1900/oz, the jewelry demand had been closer to 900 tons, so it is not just about the price of gold.

It is a lot more about COVID uncertainty. The difference in 2020 is that the high gold prices have also been accompanied by a growth slowdown due to the Coronavirus pandemic. Unlike in 2008, this time around the economic contraction is seen in the US and EU. As a result people are just unwilling for any kind of conspicuous consumption.

The lockdown has only exacerbated matters. It has resulted in loss of jobs, sharp reduction in income levels and also loss of purchasing power. This has deeply impacted consumption. The Indian markets have been traditionally price sensitive and the uncertainty over jobs and income has only added to that risk. That is true of jewelry demand globally.