According to World Gold Council statistics, the rising dollar value of gold, global political concerns and the unpredictability of the world economy has had an adverse effect on the global demand for gold. The keenly awaited figures for the second quarter of 2002 were recently announced by the Council at a presentation in London, UK.
The latest quarterly survey reveals that consumer, investment and industrial demand for gold in the second quarter of 2002 was 14% less than over the same period last year, total demand reaching 729 tonnes. However, despite this decline in demand, the value of gold remains stable owing to a 3% increase in the value of investment, a 9% increase in industrial demand and the rise in the US dollar price. Consumer demand was 15% lower, mainly attributable to the rise in the dollar price of jewellery, and retail investment demand was stronger, although once again the price rise reduced net demand by 57 tonnes. Industrial demand also experienced weaknesses as, owing to a hesitant global economy, purchases dropped in India by 37%. However, a higher industrial demand was evident in all East Asian countries owing to improvements in the Asian electronics market.
The rise in the dollar price of gold affected consumer jewellery demand during the first quarter, and has continued to do so during the second quarter. In countries such as India and those in the Middle East, where consumers often trade jewellery instead of purchasing during times of economic instability, gold demand plummeted and contributed to an overall 15% decrease in consumer demand. Falling from 690 tonnes in 2001 to 581 tonnes in the same quarter this year, consumer purchases experienced a 16% drop. Statistics also reveal a decline in consumer jewellery spending in Europe, mainly owing to concerns over economic growth and increased unemployment. In Europe’s largest gold jewellery consumer market, Italian sales were down 6% compared with the same period in 2001.
The UK market experienced similar waning consumer confidence as the demand for gold jewellery dropped by 5% compared to the same period last year. However, although the demand for gold declined, the quality of gold bought for commercial purposes increased. In the second quarter of 2002 the demand for 18 carat gold by British buyers increased by nearly 10%, while sales of 9 carat gold were down by nearly 7%.
Despite this, there was an overall decrease in consumer demand, but this was counteracted by a rise in retail investment demand. As worldwide political and economic concerns heightened and stock markets crashed, the dollar value of gold bought for investment rose by 3%. The rise in value was even greater in the first quarter, with an increase of 26%. This strong first quarter stabilised the market, making the offtake for the first half of the year 12% higher. Unlike the first quarter of 2002, the second quarter saw the fall in quantity purchased outweigh the stronger dollar value of gold, and subsequently the overall quantity of gold purchased for investment purposes fell by 12%.
While demand wavered in the consumer sector, industrial statistics showed a steady increase as the East Asian market began to recover from a recent downturn in electronics production. Statistics suggest that the Asian electronics market is showing improvements, a factor that inadvertently affects gold demands. Electronics areas that experienced noticeable growth during the second quarter included semiconductor chips that are used in colour screen displays and chip devices that are used in smart cards and other electronics components. Japan, the largest industrial global gold consumer and a leading electronics manufacturer, showed significant industrial increases in 2002 with an offtake of 22.7 tonnes, a quantity that is 18% higher than the previous year. South Korea experienced a similar electronics boom with gold demand for this sector increasing by 14%.
South Korea also showed a slight increase in dental demand, attributable to growing consumer confidence. However, although the overall global dental demand was up by 0.6% in the last quarter, this global picture does not identify the reasons for such increases. For example, owing to an increase in palladium prices Japanese consumers began to favour an alloy that consisted of 12% gold and 20% palladium, and the American market actually weakened by 3 % owing to a trend that saw gold being substituted by non-precious metals and ceramics.