30 April, 2020

Twin effects of COVID 19 and soaring gold prices caused global jewellery demand to plummet 39%

  • Q1 jewellery demand fell to a record low in our series of 325.8t, 39% lower y-o-y
  • In value terms, Q1 global demand fell to US$16.6bn, its lowest since Q2 2010 in the aftermath of the Global Financial Crisis 
  • China, the largest jewellery market, was hardest-hit by lockdown measures in Q1 – demand  was slashed by 65% y-o-y.
Tonnes Q1'19 Q1'20   YoY
World total 533.4 325.8 -39%
India 125.4 73.9 -41%
China, P.R.:Mainland 183.6 64.0 -65%

Jewellery consumption plunged in Q1 as local gold prices in various countries rocketed and markets were shuttered in efforts to contain the coronavirus pandemic. Global jewellery demand hit the lowest quarterly total in our series, dropping 39% y-o-y to 325.8t. This is 42% below the five-year quarterly average of 558.1t. The value of global demand sank 26% y-o-y to a 10-year low of US$16.6bn, in spite of a quarterly average gold price of US$1,582.8/oz.

Almost without exception, jewellery markets across the globe recorded y-o-y losses as the impact of the coronavirus compounded the effect of high, and steeply rising, gold prices.


Fears over global impact of coronavirus helped drive gold prices up

Fears over global impact of coronavirus helped drive gold prices up

Sources: CNN, Datastream, ICE Benchmark Administration, World Gold Council, WHO; Disclaimer

Note: Index level 100 =01/01/2020


China’s Q1 jewellery demand fell 65% y-o-y to 64t. The COVID-19 outbreak, which took a meaningful hold in January, slashed jewellery demand to its lowest for more than 13 years. The highest quarterly average Shanghai Gold Exchange (SGE) gold price ever, combined with consumers’ budgets being limited by widespread lockdowns, also took their toll – price and consumer expenditure being two key fundamental drivers of China’s jewellery demand, as discussed in our recent report China’s gold market.  

Shopping malls were desolate for most of the quarter. Spending on non-necessities was limited as household incomes were restricted by a combination of the shutdown and stubbornly high inflation. According to the National Bureau of Statistics (NBS), with China’s Q1 GDP declining by 6.8% y-o-y, disposable income was 3.9% lower y-o-y on average. In such circumstances, Chinese consumers prioritised expenditure on necessities rather than on recreational items such as gold jewellery. While overall retail sales in China fell by 19% y-o-y, sales of necessities such as food and drinks rose 13%.

Meanwhile, the quarterly average local gold price reached a new record since the establishment of the SGE in 2002. The Q1 average price for both AU9999 and AU(T+D) contracts reached record highs of RMB355/g. This drove jewellery demand down further.

Innovative products with lighter weights and fashionable designs continued to outperform other categories as online platforms provided some support. With the public confined to their homes, Chinese jewellery retailers were actively searching for new sales channels; and online marketing and livestreaming became popular. These channels provided an element of support for jewellery sales, especially innovative hard 24K products. 24K products. As we mentioned in our report on the 2019 Beijing Jewellery Fair, these pieces have already attracted many young consumers (the largest segment of online shoppers) with their intricate designs, lighter weights and relatively low per-piece prices compared with chunky traditional 24K products. This price advantage was vital to the category’s resilience, given the limitations of consumers’ budgets during the quarter.

One of China’s leading jewellery retailers told us that their digital store attracted a substantial number of new customers within two days of its late February launch. And light, 24K hard products were particularly popular.  

But the clouded jewellery market may have some silver-linings. Jewellers’ adoption of technology is likely to accelerate. As mentioned above, online channels were vital to many jewellers’ survival in Q1, which may encourage investment in building digital platforms. As we highlighted in our Global consumer research report, Retail gold insights 2019, China’s Gen Z consumers are highly technologically-savvy, but less emotionally connected with gold; such technological advances could therefore help improve gold’s popularity among this audience.

Consumption stimulating policies from the Chinese government and promotions by jewellery retailers could be supportive for China’s jewellery demand in Q2 and beyond. For instance, in March, many cities handed out e-vouchers worth billions of renminbi to boost leisure spending on activities such as dining and shopping. Leading Chinese jewellery retailers such as Chow Tai Fook offered discounts on a wide range of products to further support sales. While the effectiveness of these measures in boosting Chinese jewellery demand remains to be seen, sales of gold, silver and diamond jewellery posted a narrower y-o-y decline in March compared with February, according to the NBS. 1


Coronavirus lockdown and high gold prices slashed demand in China and India

Coronavirus lockdown and high gold prices slashed demand in China and India

Sources: Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer


Q1 jewellery demand fell 41% to an eleven-year low of 73.9t as COVID-19 compounded the impact of higher domestic gold prices amid a depreciating currency and softer economic growth. Although the wedding season lifted demand early in the quarter, a sharp increase in local gold prices from mid-February led to a slowdown in demand as consumers held back on purchases. Later in the quarter the market suffered as the lockdown took effect: demand in March slumped by between 60-80%.

The Q1 average price of Rs41,124/10g in Q1 was 26.6% higher y-o-y. The local gold price continued its upward trajectory in Q1 2020 and breached previous historical highs. A weaker rupee, combined with a rising dollar gold price, resulted in the local gold price closing at an all-time high of Rs44,315/10g in March.

Concerns around economic growth impacted demand. India’s GDP growth has been on a downward trajectory since Q1 2019 and green shoots of recovery were sparse in Q1. Against such a backdrop, consumer spending on non-essential items declined. This was accentuated by the outbreak of COVID-19 in March. Middle-class urban consumers and rural consumers became more cautious in opening their wallets to purchase gold, and footfall to jewellery stores slowed early in March. This was followed by a gradual closing of retail stores mid-month, before full lockdown was imposed in the final week of the quarter. According to a Reserve Bank of India (RBI) survey conducted across 13 cities between 27 February and 7 March 2020, although consumer confidence increased slightly in the first two months of the quarter, sentiment on the general economic situation, employment scenario and household income remained pessimistic.2

While Q1 demand was hard hit, we expect the impact of COVID-19 to be more severe in the second quarter, as the lockdown extends into May. This will impact gold demand during the key buying festival of Akshaya Tritiya, as well as wedding-related purchases. Although some branded retailers have reported increased interest in their online platforms, logistical issues imposed by lockdown measures have made it difficult to fulfil the orders they generate.

Middle East & Turkey

Turkish jewellery consumption fell by 10% y-o-y in Q1 to 8.6t. Although demand was lower in comparison with Q1 2019, it was relatively resilient in the face of local gold prices hitting new highs throughout Q1. This was partly due to safe-haven demand for 22 carat gold jewellery, and partly due to the comparison with a very weak Q1 2019. However, the Q2 outlook is negative as the government began to impose lockdowns in April, which have closed the vast majority of jewellery stores.

Jewellery demand in the Middle East was 9% lower y-o-y at 42.9t. Markets across the region were also disrupted by coronavirus. Iran was hit by the virus earlier, and more severely, than most other markets in the region, and this  is reflected in the 20% decline in demand to 7.7t. 

Egypt was again something of an outlier: demand was unchanged from Q1 2019 at 6.9t. Despite the ongoing pandemic, Egypt elected not to undertake a total lockdown and this insulated the market from the losses sustained across the rest of the region. The outlook for Q2 is less positive, however, as the economic impact of the region’s lockdown is expected to take hold. 

The West

Q1 saw the first y-o-y decline in US jewellery demand since Q4 2016. The healthy growth in US jewellery consumption over the last three years abruptly reversed in Q1. Demand slipped 3.7% y-o-y to 23.1t, the decline being almost purely COVID-related.

After gains in January and February, demand fell sharply in March as state-level restrictions triggered the downturn: by quarter-end, much of the US was under some degree of restriction. The consequent jump in unemployment and caution towards discretionary spending only magnified the impact on demand. While there was some compensation from growth in online demand, the volume of sales being made via this channel is currently too small to make a notable impact. 

Jewellery demand in Europe was similarly weak: double-digit declines were common across the region. Q1 demand fell 15% y-o-y to a record low for our series of 10.8t. Unsurprisingly, losses were most pronounced in Italy (-22% y-o-y) and the UK (-20% y-o-y). Retail sales in the UK had already been weak in January and February before COVID-19 hit the market in March.  By quarter-end, all four hallmarking offices had closed for the first time in history. 

Other Asia

The smaller east Asian markets all sustained double-digit losses in Q1, with price-driven weakness giving way to the impact of coronavirus. Indonesia (-55%) and Thailand (-45%) suffered particularly severe losses. 

Japan was relatively resilient, with y-o-y losses contained to ‘just’ 10%. Demand was modestly lower at 3.1t as few restrictions were imposed during Q1. The prospects for Q2, however, are less optimistic: the market has seen a significant slowdown since the end of March and PM Shinzo Abe declared a state of emergency in April as the number of COVID-19 cases roses sharply.


US$ value of Q1 jewellery demand sank to a 10-year low despite lofty gold price

US$ value of Q1 jewellery demand sank to a 10-year low despite lofty gold price

Sources: ICE Benchmark Administration, Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer

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