9 November, 2017

Jewellery demand fell 3%, weakened by a sharp drop in India

  • The y-o-y drop in global demand was largely attributable to India, which has been disrupted by the changing tax regime and tighter regulation around jewellery transactions
  • China bucked its recent declining trend: jewellery demand was boosted by auspicious-day purchases.
  • Turkey saw a second consecutive quarter of growth, aided by lower lira gold prices 
Tonnes Q3'16 Q3'17 YoY
World total 495.3 478.7 -3%
India 152.7 114.9 -25%
China 140.6 159.3 13%

Global gold jewellery demand, having improved during the first half of the year, deteriorated in Q3. Demand dipped to 478.7t – the weakest third quarter in our 17-year data series. Year-to-date demand of 1,457.3t is a modest 3% ahead of 2016, which was itself a very weak year. 


The H1 recovery in Indian jewellery demand was derailed in Q3 by regulatory intervention. After three consecutive quarters of growth, demand fell by 25% y-o-y to 114.9t in the third quarter. The introduction of the 3% Goods and Services Tax (GST) at the beginning of July was a contributing factor. As we noted in Gold Demand Trends Q2 2017, a large swathe of Indian consumers had pre-empted the introduction of GST by bringing forward their gold purchases to Q2. This left demand a little flat at the beginning of July. 

The jewellery trade also struggled with the new tax system. While large, organised retailers, with their sophisticated accounting and inventory-management systems, were well equipped to cope with the transition to GST, smaller, unorganised retailers faced difficulties. 

Onerous anti-money laundering regulation added to the industry’s woes. Already suffering from weaker sentiment, the jewellery industry suffered a further blow when the government brought the gems and jewellery industry under the umbrella of the Prevention of Money Laundering Act (PMLA) in late August. The Act placed an administrative compliance burden on retailers and consumers alike, requiring ‘know your customer’ (KYC) documentation for all jewellery transactions with a value of Rs50,000 (roughly equivalent to US$750) or above. Demand therefore remained under pressure, particularly in rural India, where cash transactions are the norm, as consumers shied away from providing official ID to support gold purchases. 

Recognising the difficulties placed on the industry by the regulation, the government lifted the PMLA from the gems and jewellery sector in early October. This decision was well-timed, coming just ahead of Diwali. Consumer sentiment improved dramatically, although reports suggest only average festive-season buying due to the continuing obstacle of GST. 

Monsoon sent mixed signals for demand. Total monsoon rainfall, although broadly normal (around 5% below the long-term average), was distributed unevenly across the country. Inconsistent rainfall during the kharif crop-sowing season, together with prolonged monsoon rains that inflict damage on these crops, have the potential to impact rural incomes in some areas.1 This could have a knock-on effect on jewellery demand in these areas over coming quarters, although the effect will be mitigated by aid measures. The government raised the Minimum Support Price (MSP) for kharif crops and waived farm loans to the tune of Rs800bn (US$12bn) in the key food-producing states of Maharashtra, Punjab and Uttar Pradesh.

There are reasons for cautious optimism. Our view remains that the market will continue to adapt to GST, allowing demand to recover to a certain extent. Inventory levels in the market are healthy and the removal of the PMLA legislation should encourage demand. But this positive view will likely be tempered by the impact of the uneven monsoon rainfall distribution.


Demand for gold jewellery in mainland China recovered to 159.3t, up by 13% y-o-y after 10 consecutive quarters of decline. Year-to-date demand (472.4t) is in line with the same period of 2016 (465.5t). But from a longer-term perspective the market remains weak: demand is 15% below the 5-year quarterly average of 187.1t.

Holiday purchases lifted demand, albeit from a very low base. The first green shoots of recovery in the market were witnessed around late August, with gifting of gold jewellery for Chinese Valentine’s Day. This was followed by the Autumn Festival – a time for family reunion and an occasion when some parents buy their children gold jewellery for its perceived ability to bring happiness and good luck. 

Leading retailers reported decent growth in Q3: sales were up both in terms of value and volume, and new store openings resumed after a period of stagnation during 2015-16. These openings were largely concentrated in the Tier 3 and Tier 4 cities. Competition is picking up: branded, national retail chains are becoming more aggressive and this could lead to a period of consolidation. Reports from the Shenzhen Jewellery Fair were positive: both visitor numbers and sales exceeded expectations and retailers were seen replenishing inventories ahead of the Q1 Chinese New Year festive buying season, after a prolonged period of destocking. 

Although plain, 24 carat gold still dominates the market, demand was lacklustre as consumers continued to show preference for small, well-designed pieces. Sales of ‘chuk kam’ were flat and disappointing, even compared with 2016’s low base.2 Growth was concentrated among 18 carat jewellery, 24 carat 3D ‘hard-gold’ and piece-priced premium products, as consumers continue to favour innovation and differentiation over tradition. And gold continues to face stiff competition from travel, entertainment and dining for a share of consumers’ budgets. China’s National Tourism Administration estimated that over 700mn Chinese travelled during the recent October week-long National holiday. Domestic travel revenue during the holiday was estimated at 584bn yuan (approx. US$90bn), an increase of around 13% from 2016.

But there are reasons to expect that the market may establish a base: efforts to improve quality control in online purchases may support the market in the long term. Aiming to remain relevant to consumers (especially young millennials, who are twice as likely to shop online as Chinese consumers in general),3 Chinese jewellers are eagerly venturing into the cyber-retail space and trying to enhance quality assurance. In September, Alibaba, China’s largest e-commerce platform, reached an agreement with the National Gemstone Testing Center (NGTC) that all jewellery sold on Tmall and Taobao would carry its certification of quality. Jewellers such as Chow Tai Fook and CHJ are expected to be among the first to adopt this practice.

Other Asia

Demand across the rest of the Asian region was generally weaker, with one or two exceptions. A 10% y-o-y decline in Malaysian demand (to 1.6t from 1.8t) was partly attributable to the timing of Eid. This year, the festival fell in June rather than July, so festival-related purchases were captured in the Q2 demand numbers. 

Japan’s Q3 jewellery market was lacklustre: demand inched down from 4.2t to 4.1t. But industry sentiment is positive heading into Q4 amid reports that Japanese jewellery exports were well-received at the Hong Kong jewellery show. 

Vietnam again outperformed regional counterparts. Demand climbed 14% y-o-y to 3.7t as solid GDP growth boosted sentiment and encouraged consumers to spend on luxury items. The positive environment in Vietnam so far this year has encouraged industry expansion among leading jewellery retailers: Phu Nhuan Jewellery Co., for example, is reported to be on course to open more than 40 new shops in 2017, based on information from H1. Vietnam was one of the few markets to exceed its long-term performance: Q3 demand was 11% above the 5-year quarterly average. 

Middle East and Turkey

Turkish jewellery consumption increased for the second quarter in a row, helped by dips in the local gold price. Demand grew 11% to 10.3t as the Turkish lira gold price dropped in both July and August and held below the April peak for the remainder of the quarter. 2017 has seen a strong recovery in spending on gold jewellery in Turkey: the value of y-t-d demand is up 25% on 2016 at TL4.3bn, on a par with 2014.


Value of Turkish jewellery demand recovers

GDT Q3 2017 Jewellery - Chart - Value of Turkish jewellery demand recovers

Source: Metals Focus; GFMS, Thomson Reuters; ICE Benchmark Administration; Datastream; World Gold Council

Data as of

Regional demand for the Middle East was down 4% y-o-y: declines in Egypt, Saudi Arabia and UAE swamped gains in Iran. Sentiment deteriorated across the region. Higher living costs and falling tourist revenues in the UAE were behind a 10% fall in demand. Saudi Arabian demand continued to suffer due to weaker oil prices and rising employment costs. The planned introduction of a 5% VAT rate in January in both markets may boost demand before the end of the year, although we believe the effect will be temporary: demand is likely to falter once the new tax is in place. Iran’s jewellery market notched up its ninth consecutive quarter of y-o-y growth, increasing by 8% to 11.4t. The central bank imposed interest rate controls, which boosted spending on gold jewellery (as well as on bars and coins).

The West

The US was the strongest of the industrialised Western jewellery markets. With demand of 26.9t, the US saw its strongest Q3 since 2012. The sound economic and employment environment has supported consumer sentiment this year, which rose to a 13-year high in October. Demand y-t-d is up 4% to a seven-year high of 76.8t, a figure that firmly maintains the position of the US as the third largest jewellery market globally. Mark Hanna, Chief Marketing Officer of Richline Group, Inc. believes that although this ‘globally significant market…faces further challenges’, it can ‘flourish, if it adopts key initiatives’.4


Year-to-date US Jewellery demand reaches seven-year high

GDT Q3 2017 Jewellery - Charts - Year-to-date US Jewellery demand reaches seven-year high

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

Data as of

Weakness in Europe was largely due to losses in the UK – other markets were broadly steady. UK demand was hit by pre-Brexit jitters, with consumers uncertain as to the likely economic impact of Britain’s exit from the EU. Demand fell 5% to 4.6t. Losses were concentrated in the 9 carat mass market, while the 18 carat and 22 carat segments were relatively well insulated. In contrast, France saw a marginal improvement in demand (from 1.9t to 2.0t), thanks to improving economic factors and increased tourism.


  1. India has two main cropping seasons: Kharif and Rabi. Kharif crops are sown during the summer monsoon, beginning with the first of the rains in July, and are harvested in the winter. Rabi crops are sown during the winter months, with a spring harvest.

  2. 'Chuk kam' translates as ‘pure gold’ and is widely used to refer to plain, 24-carat gold jewellery

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