High and volatile gold prices plus the slowdown in world GDP growth are likely to cut international gold jewellery demand by 11 percent in 2009, according to the world’s leading precious metals consultancy, GFMS.
Releasing the consultancy’s second half-yearly Gold Survey update, GFMS executive chairman Philip said that although a 11 percent drop may “sound restrained” the actual tonnage could “easily be a 20-year low”.
The Update reveals that world jewellery fabrication fell by 11 percent or 262 tonnes in 2008 to its lowest level since 1989.
It concludes that record and volatile gold prices, combined with a deteriorating economic backdrop, were the key reasons behind this poor performance although there was some brief respite in the third quarter when lower gold prices in several key currencies produced a 30 percent rise in jewellery fabrication over the April/June quarter.
Klapwijk said GFMS’ forecast 11 percent fall in gold jewellery demand would affect every region in the first half of 2009.
“Just two years ago (in the first half of 2007) jewellery fabrication was 400 tonnes higher than we are predicting for the first six months of 2009,” he said.
The GFMS report is also predicting that gold prices could achieve a “fresh all time high” in the first half of 2009 as net investment surges.
The consultancy noted that there has already been several months of rocketing demand, chiefly in Europe and North America, primarily from high net worth and retail investors, but this has been masked by heavy fund redemptions as cash has been sought to cover losses elsewhere, meet margin calls and so forth.
“If it hadn’t been for this fund selling, we’d be easily back over $1000 by now and, as soon as it quietens down, I’m sure a strong rally is going to emerge,” said Klapwijk.
He said the main motivation behind this expected surge in investment is likely to be risk aversion and a desire to preserve wealth. In addition, he said, gold was also seen as benefiting from concerns over the solidity of other assets, be that cash at a time of bank failures, equities as we head into a possibly deep recession or bonds as the threat of inflation looms.
The average price of gold in 2008 was US$871.96 – it reached a record high US$1030.80 on March 17.
For more information visit www.gfms.co.uk