6 February, 2018

Modest Q4 growth sets the seal on a positive year for jewellery demand.

  • Full-year gold jewellery demand increased by 4% to 2,135.5t; the first year of growth since 2013 
  • India’s 12% y-o-y improvement was partly due to a very weak 2016. Demand fluctuated on changes in tax and regulation
  • The US market returned to growth: encouraging economic environment helped lift demand to its highest annual total since 2010
  • Lower gold prices and seasonal factors in China and India aided a fourth quarter recovery
Tonnes 2016 2017 YoY
World total 2,053.6 2,135.5 4%
India 504.5 562.7 12%
China 630.4 646.9 3%

Demand for gold jewellery gained momentum in the final quarter of 2017, growing 3% y-o-y to a 2-year high of 648.9t. A corresponding increase in full-year demand was primarily driven by recovery in India, the US and China. These three markets together accounted for 78t of the 82t increase in global full-year demand.


Indian jewellery demand recovered in Q4, gaining 4% y-o-y to reach 189.6t, the highest fourth quarter in our 17-year series. Rupee gold prices trended lower during the quarter, which proved positive for demand. The economic backdrop helped bank loan growth. Demand was further supported by:

  • festival demand
  • the government’s decision to remove anti-money laundering regulation from jewellery
  • improved rural sentiment.

In contrast with Q3, when the price was in almost permanent discount, the local price traded at a small premium to the international price for much of Q4. October started well: the Dhanteras festival – marking the start of the wedding season – coincided with a dip in prices, which encouraged demand.


Gold traded at a small premium in India for much of Q4

GDT FY 2017 Jewellery - Chart Indian gold

Source: NCDEX; World Gold Council

Data as of

An added boost came when the government granted the gold market an exemption from onerous anti-money laundering measures. The Prevention of Money Laundering Act (PMLA), which was extended to the gems and jewellery sector in August, had negatively affected jewellery demand as consumers and retailers were faced with a heavy administrative burden to prove the veracity of cash transactions. The effect was most pronounced in rural areas, where cash is widely used. The removal of the PMLA from the sector therefore had a positive impact on demand. 

Rural sentiment picked up in the fourth quarter, supporting a key element of the market. Consumers in rural areas are the driving force behind Indian gold jewellery demand.1 Positive sentiment among this demographic is quickly felt in certain areas of the economy, the gold jewellery market being one of them. Sentiment was vastly improved compared with Q4 2016, when these consumers were struggling with the drastic and unexpected demonetisation of the economy. A 6% increase in the minimum support price for kharif crops also helped. Strong growth in tractor sales bears out this improvement: Mahindra & Mahindra Ltd.’s Farm Equipment Sector (the world’s largest tractor manufacturer) announced 32% y-o-y growth in tractor sales during November and are upbeat in their outlook.

The market is becoming increasingly accustomed to the Goods and Services Tax (GST). As foreseen in our Market Update: GST’s impact on India’s gold market, organised retailers were best equipped to transition to the GST system and this worked to their benefit as they increased their share of the jewellery market.

Looking forward, we expect a continued recovery in demand as the market increasingly accepts, and adapts to, GST. And the relative outperformance of chain stores and organised retailers is, in our view, likely to be a key feature of this recovery.


China’s 6% growth in Q4 contributed to a 3% rise in annual jewellery demand – the first yearly increase since 2013. Demand for the full year increased to 646.9t thanks to a strong H2, which was buoyed by holiday purchases and a retail trade more effectively targeting consumer needs. 

The trend for lower-weight, better designed, higher-margin ‘premium’ gold jewellery products continues to gather momentum. Retailers are increasingly tapping into this segment of the market, shifting their product offering to incorporate more 18-carat, 22-carat and 3D hard products. Although 24-carat gold still dominates the market, it is fast losing market share - notably in tier 1 and 2 cities. Major retailer Chow Tai Fook reported that it sold more than 300,000 pieces of 22-carat jewellery under its 17916 product series and that demand for gold drove sales growth in the six months to end-September.   

Retailers are also appealing to customers by offering an enhanced shopping experience – and online retailing is a key part of that strategy. Chow Tai Seng, which partners with Tmall – Alibaba’s ecommerce platform – saw its sales up 70% year-on-year on ‘Singles Day’, to more than 80 million yuan (US$12 million). The jeweller’s self-operated stores are mostly located in tier 1-2 cities, but by piggy-backing on the online reach of Tmall, it can easily reach consumers in more than 300 cities throughout China. In a bid to appeal to younger consumers, the company has also embraced the latest technology – augmented reality (AR). Visitors to its ‘smart store’ can see how each piece of jewellery looks on them using a ‘magic mirror’.

The outlook for Chinese jewellery demand is, we believe, quite positive. Retailers continue to better meet consumers’ changing needs and sentiment is lifted by the supportive economic environment. There is also a view that demand is improving at a more sustainable rate than in the bargain-hunting frenzy of 2010-13.

Other Asia

Smaller Asian markets were predominantly weaker in both Q4 and full-year 2017; only Indonesia and Vietnam bucked the trend. Demand across much of the region was stagnant at best in Q4, translating to losses in annual demand. Japan had a disappointing result: Q4 demand was marginally weaker at 5.1t (-1%). This added to weakness earlier in the year, with the result that 2017 annual demand slipped 2% to 16.6t. Improving conditions in the wider retail sector may, however, extend to jewellery over the coming year.

Vietnam was the strongest market in the region: 11% y-o-y growth in Q4 lifted annual demand by 7% to 16.5t. This was the strongest year for Vietnamese jewellery demand since 2008. Demand benefited from robust economic growth and continued stock market gains. Expansion of the jewellery retail network, and the tentative signs that the government will begin to liberalise the gold market, also boosted the market.

Middle East & Turkey

In Turkey, record-high local prices weakened Q4 jewellery demand and put the brakes on annual growth. The gold price in Turkish lira terms jumped to record highs in late November, discouraging consumers from buying jewellery. Meanwhile, the government’s Credit Guarantee Fund, which had injected the economy with a short-term liquidity boost, dried up.  Economic uncertainty and political instability were further deterrents. But recycling activity was similarly subdued – in the uncertain environment, consumers preferred to stay on the sidelines.

Middle Eastern demand recovered in Q4, but H1 losses dominated: annual demand was down 1% y-o-y. Iran was the strongest performer in 2017: Q4 was its tenth consecutive quarter of y-o-y growth. Annual demand gained 12% to 45.4t, the highest since 2013. But the market lost momentum in the fourth quarter as worsening US-Iranian relations undermined consumer sentiment. 

In Egypt, demand was dented again by the weak local currency, which kept prices elevated. But in value terms, demand increased in 2017 (by 56% to reach E£15.8mn), suggesting that consumers consider a certain value of spend rather than focusing on the weight of gold they purchase. 

Demand in the UAE received a small boost in December as consumers rushed to make their purchases before a 5% Value-Added-Tax (VAT) was imposed in January. But the 16% y-o-y gain in Q4 demand failed to rescue the market from a fourth consecutive annual decline: 2017 demand was down 2% to a 20-year low of 42.8t.

The West

Annual jewellery demand in the US gained 3% to 122.1t, as Q4 demand reached an eight-year high. The improving economic environment that buoyed sentiment – and demand – in Q3 continued to lift the market in the final quarter. Q4 demand of 46.1t was the highest fourth quarter for US jewellery since 2009. Online sales accounted for a growing share of jewellery demand, which played to the strengths of the larger, higher-end retailers. Tiffany & Co., for example, reported 8% growth in their holiday season sales. Luxury retail analysts at Cowen & Co confirmed that they remain enthusiastic on Tiffany in part because of their ‘the tasteful blending of stores and online which should result in less friction in the buying process…’. In contrast, lower-end, mass-market retailers have suffered.


US jewellery demand: recovering but still a long way from previous levels

GDT FY 2017 Jewellery - Chart US jewellery demand: recovering but still a long way from previous levels

Source: Metals Focus; GFMS, Thomson Reuters; World Gold Council

Data as of

In 2017, Europe saw a third consecutive annual decline in jewellery demand, with losses persistent throughout the year. The 3% drop in regional demand (from 76.1t to 74t) was largely due to weakness in the UK market, which remained troubled by Brexit concerns. The lower-end of the market was worst hit, with 9-carat jewellery seeing the largest losses. Demand in the 22-carat niche was contrastingly resilient. Italian demand was also softer, although regional differences were noted: better than expected demand in northern Italy alleviated losses in the more traditional south.

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