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Home   » World Gold Council Third Quarter Report 2006
 

World Gold Council Third Quarter Report 2006 

The World Gold Council in its third quarter report has presented an overall trend in gold demand throughout the world, excluding Pakistan. The following points in the report are noteworthy and need attention of the jewellers' community of Pakistan to increase their efforts for rising gold jewellery exports and earning good name for the country. This will help in including Pakistan's name in the list of World Gold Council activities countries, which was suspended because of unknown reasons in the past.

Following are the main points of the reports:

 Key points: 

Quarter-3 was a quarter of transition. Consumer demand (jewellery and retail investment) was subdued at the beginning of the quarter with the market battered by the volatile price movements of the previous 10 months. Everything changed after the price stabilized in August and then fell below $600/oz in September with a surge in demand, which continued in October.

 Consumers in Asia and the Middle East (especially in India), who have been cautious during periods of price volatility, have clearly accepted $570 to $600 as an acceptable price range. However, volatile prices above $600 appear to sustain demand.

 The change in trend in Quarter-3 limited the fall in total end-use tonnage demand compared to a year earlier to three percent, a smaller decline in the first half year. In dollar terms Quarter-3 was 37 percent higher than a year earlier In September 2006, total demand reached $ 62 billion, the first time it has pushed through the $ 60 billion level.

 In Quarter-3 jewellery demand fell by four percent in tonnage terms from a year earlier. In dollar terms this was equivalent to a 36 percent increase, setting to a new quarterly record at $ 11.8 billion. There were mixed trends in identifiable investment with retail investment rising seven percent in tonnage terms but slower demand for Exchange Traded Funds.

 Industrial demand was five percent higher than a year earlier with electronics demand reaching a new tonnage demand.

 Gold supply was 12 percent below year-earlier levels with all components contributing to the fall. Reported central bank sales under the Central Bank Gold Agreement during the CBGA year ended September 26 were over 100 tones less than the 500 tone ceiling although there is uncertainty about the possible extend of forward sales not yet settled that may need to be added to the annual total.

 Late October brought the Diwali period, a key gold-buying time in India, and Eid-ul-Fitr at the Ramazan, a traditional gold buying period in the Middle East. These added to demand. Unlike last year, when they were volatile and rising, prices remained favorable and stable and buying was strong. While in India, and in one or two other markets, jewellery demand was higher than a year earlier. Quarter-3 is usually the weakest quarter seasonally but this year jewellery demand, at 592 tonnes, was higher than in Quarter-2, at 556 tonnes, and Quarter-1, at 521 tonnes.

 CONSUMER DEMAND TREND IN INDIVIDUAL COUNTRIES 

India

 Quarter-3 saw a dramatic turnaround in Indian demand. At the start of the period demand was very subdued—the exceptional price volatility of the first half year, following what was already a sharp price rise in the last months of 2005, proving a strong deterrent to purchase. The stabilization in the price during August then provided the basis for improving consumer confidence so that demand started to pick up in September.  After the period of price stabilization in the second half of August and early September, sub-$600 prices after September 11 looked a bargain in the light of earlier price movements and consumers started guying feverishly. Suddenly retail outlets were busy across all markets, retail inventories fell with even slow-moving lines being bought and orders poured into manufacturers who started to work overtime.

 This enthusiastic buying continued into October and the Diwali period which proved an excellent time for jewellers.  Traders reported increases of 25-40 percent in Diwali-related sales compared with the, admittedly poor, season in 2005. The All-India Jewellery Shopping Festival, which started in late September and is the largest ever jewellery promotion in India, also helped. With the price perceived to be at attractive levels, there was also advance buying for future weddings. Despite the weak beginning, jewellery demand for Quarter-3 as a whole was 12 percent higher than in Quarter –3 2005.

Greater China

 Consumer demand in Greater China was 3 percent higher in Quarter-3 than a year earlier although this overall modest rise conceals contrasting trends both within the region and at different times during the quarter.

 In Mainland China buying was slow during July and the first half of August following the fall in price. It started to recover later in August when the price stabilized and the fall below $600/oz then stimulated buying in September and into October, particularly around the 1 st October National Day holiday. Overall jewellery sales in Quarter-3 were just 1 percent higher than a year earlier.

 Nevertheless, consumers in Hong Kong remain quite cautious as regard gold buying and diamonds dominate the jewellery market. Further, Chinese tourists visiting Hong Kong during the National Day holiday have tended to favor cosmetics and electronics products rather than jewellery.

Other East Asia

 Gold demand was exceptionally strong in Vietnam in Quarter-3. At 6.2 tonnes jewellery demand was a Quarter-3 record and eight percent higher than in Quarter-3 2005. Against the background of a strong growing economy, the price dip and the approaching wedding season spurred demand while there is also an investment element to Vietnamese jewellery buying. 

The demand for gold teal bars was so strong that people had to wait six weeks and deposit 20 percent in advance. Bullion import quotas for the year were exhausted early in Quarter-3 and the State Bank had to grant permission for a further 20 tonnes.

 As in other markets demand for both jewellery, spurred by the wedding season, and investment remained strong in October. There is price resistance and demand slows when the price exceeds $600/oz although it does not disappear.

Middle East & Turkey

 Consumer demand in the Middle East as a whole was eight percent lower than a year earlier with all countries, apart from the UAE, experiencing falls. As elsewhere the pattern in the region was of two mediocre months followed by one good month. The Saudi economy typified the pattern for the region with subdued demand in the first two months of the quarter causing overall demand to fall by nine percent from year-earlier levels.

 The Egyptian economy is reviving and benefited from additional tourism in July and August from Middle East citizens who would normally have spent part of the summer in Lebanon but were prevented by the war. However, the fall in gold buying was sharper than in rest of the Middle East.

 Tourist demand normally makes Quarter-3 the peak season for jewellery buying in Turkey but the combination of the bombs in tourist resorts deferring visitors.

Europe

Jewellery demand in the two European markets tracked quarterly remained weak. Italy's economy is only growing slowly consumer confidence has remained broadly stable in the last few months. There has been some small growth in both retail sales and consumer spending as a whole but it has been limited. This was not a propitious background for discretionary purchases and, coupled with the trend towards other jewellery materials, this resulted in gold demand remaining 10 percent below year-earlier levels in Quarter-3.

Jewellery consumption in the UK registered a 13 percent fall from year-earlier levels in line with trends in the first half of the year. Hallmarking of gold articles was down 17 percent by number of prices and 28 percent by weight from a year earlier. Jewellery is suffering generally in the UK with similar trends in silver hallmarking by number (and a much sharper fall by weight) although the decline in platinum items is not as severe. The decline is gold items is concentrated in the mainstream 9-carat category and also the 22-carat category. Eighteen-carat jewellery-the quality end of the market-is resisting, with a seven percent fall in the number of items hallmarked and only a one percent decline by weight. 

Retail investment in Europe remained negative in Quarter-3 with continued dishoarding in France outweighing positive numbers in Switzerland and the rest of Europe.

USA

As in the first half of 2006, US gold demand was down (Eight percent) in tonnage terms compared to a year earlier, although this was equivalent both to a substantial increase in the crude value of gold used (nearly 30 percent) and, more significantly, to a satisfactory increase in the actual retail value of gold jewellery bought. Data on retail value are not available for quarter-3 but figures for the first half year show year-on-year growth in primary-value-gold jewellery of 5.3 percent.

 


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