Gold jewellery production in the Middle East was the hardest hit in the world last year due to record high prices for the yellow metal, independent experts said. The amount of gold jewellery made in the region dropped by 34 per cent to 315 tonnes last year, the biggest decline worldwide, said GFMS, a precious metals consultancy based in London.
"The reasons behind that were the recession last year and the high and often record gold prices," said Philip Newman, the research director at GFMS. "Even though prices later in the year were less volatile they often stabilised at a high level. "The level was too high and discouraged consumers from buying jewellery." The historically robust demand for gold jewellery in the Middle East has been hampered by budget-conscious shoppers and steeply rising gold prices.
The price of spot gold rose from a low of US$812 an ounce on January 15 last year and peaked at $1,216 on December 3. Gold was trading at $1,135.63 in New York yesterday morning. The steep regional decline in jewellery fabrication was driven by Turkey, where the rising cost of gold, combined with the weak lira, discouraged local consumers. "The biggest drop would be in Turkey, but locally retail sales are down and most of the manufacturers here are geared for local demand," said Chetan Karani, the deputy managing director of the Dubai Gold and Jewellery Group.
"The high gold price does contribute to it, but I think the general consumer demand doesn't seem to be as strong." The price rally also triggered a rush towards gold as an investment. While global gold jewellery demand fell by 23 per cent, gold as an investment worldwide jumped by 885 tonnes to 1,820 tonnes. This marked a gain of 105 per cent and the first time investment demand had exceeded jewellery manufacturing demand in 30 years, GFMS said.
In the Middle East, however, where most gold demand is for jewellery, investment gold purchases fell 57 per cent to 27 tonnes. The amount of scrap gold - pieces sold back into the market - rose 27 per cent globally as consumers cashed in on the high price. GFMS predicted the gold price this year would hit fresh records and exceed $1,200 an ounce by the second quarter. It also expected global jewellery fabrication to grow by 17 per cent in the first half of this year, driven by pent-up demand in India, traditionally the biggest consumer of gold.
But in the Middle East, GFMS forecast a 6 per cent decline in jewellery manufacturing in the first half of this year, again led by thriftier buying habits in Turkey. @Email:email@example.com