Global gold jewellery consumption of 523t improved 10% y-o-y in Q3, and was up 14% compared with the prior quarter. Demand was also healthy on a longer-term comparison. exceeding its five-year quarterly average (501t). Y-t-d demand reached 1,454t, a 2% improvement on the same period in 2021.
This signals a continued normalisation of the market to pre-COVID levels of activity, aided by a pullback in the gold price in many markets during the quarter. Q3 also saw a further build-up in inventories as growth in fabrication exceeded that of consumption.
After the disruption of China’s widespread Q2 lockdowns, gold jewellery demand staged a comeback in Q3, rallying 58% q-o-q to 163t. The y-o-y comparison shows a more modest 5% increase. Despite sporadic restrictions being imposed throughout the quarter, consumer sentiment in July and August was upbeat, aided by a pullback in the local gold price and the release of pent-up demand from Q2. .
Jewellery consumers were driven by investment motives more than usual, given the uncertain environment of continued sudden lockdowns, slowing economic growth and a weaker domestic currency. This boosted sales of plain 24K products, which are increasingly priced according to weight rather than per piece (yielding lower, and more transparent, labour charges). Consequently, retailers continued to focus their promotional efforts on heavier items in order to bolster profits.
Q3 saw continued growth in demand for heritage gold jewellery products, which gained further market share. In particular, plain antique crafted gold bangles were exceptionally popular, underscoring the quasi-investment nature of gold jewellery demand. This is further implied by the falling market share of 18k gold, which offers a less compelling investment proposition to consumers who wish to preserve value through high-carat jewellery.
Looking ahead to demand in Q4, we see more upside potential than downside. Seasonality and the government’s priority of stimulating consumption may provide some support for gold jewellery sales in the final quarter, along with a continued preference for quasi-investment gold jewellery products. But challenges from the zero-COVID policy can’t be overlooked. The national day holiday early in Q4 saw uneven gold jewellery demand, with retailers in lockdown-stricken cities disappointed.
A 17% y-o-y increase in Indian jewellery demand – to 146t – was led by strong demand in the South. Q3 demand was 12% above its five-year quarterly average (131t) and took y-t-d demand to 381t, 10% higher than last year and almost equivalent to 2019 pre-COVID levels.
Urban India consumers have driven the recovery in gold jewellery demand, as economic activity in these areas has normalised. Credit expansion has added impetus to this demand, with bank loan growth touching a nine-year high by quarter-end. 1
We are positive in our outlook for the rest of the year, as festival and wedding demand should be supportive. But demand is not expected to match last year’s record-breaking fourth quarter, particularly given that higher inflation relative to urban India may crimp demand in the important rural segment.
Middle East and Turkey
Double digit y-o-y gains in jewellery demand were widespread across the Middle East during Q3. Demand across the region benefited from lower gold prices during the quarter, while higher oil revenues and increased tourism also boosted demand in some markets. Rising inflation underscored the investment motive for some purchases, too.
Gold jewellery demand in Turkey was 19% higher y-o-y at 11t in Q3, the strongest quarterly total since Q4’17. Rocketing inflation helped support demand, underpinning the investment motive for purchase of high-carat pieces.
US consumers slowed their gold jewellery purchases in Q3. Demand again retreated from last year’s very healthy COVID-rebound levels; at 30t it was 6% lower y-o-y and 20% down from the previous quarter. On a longer-term basis, however, Q3 demand compares relatively well: average third quarter demand for the five years pre-COVID was 27t.
As spending on services such as travel and entertainment has normalised in the post-COVID era, spending on luxury goods, including gold jewellery, has declined in compensation. And the increasingly challenging economic environment suggests that demand in Q4 will fail to match the very strong final quarter of last year.
European jewellery demand increased 4% y-o-y, reaching its highest Q3 total since 2010. Demand was supported by low unemployment and continued recovery in regional tourism. Y-t-d regional demand of 40t is back in line with pre-COVID norms, in fact exceeding 2019 levels. But we proceed with caution from here as the economic backdrop deteriorates and consumers increasingly have to contend with cost of living pressures and slowing economic growth.
Jewellery consumption rose across Southeast Asia in Q3. Demand was buoyed by continued recovery from COVID as most remaining restrictions were lifted, allowing full economic activity to resume. In Vietnam, jewellery consumption more than trebled y-o-y to 4t. The sizable increase is largely due to the comparison with a very weak Q3’21. Nevertheless, the Vietnamese recovery has been particularly robust, with healthy GDP growth, incomes boosted by reversed salary cuts and companies returning to full employment, all of which boosted demand.
Jewellery consumption in Thailand rose for the seventh consecutive quarter, increasing by 35% y-o-y to 3t. This is the longest streak of demand growth in Thailand in our series, aided by a revival in tourism. The drop in local gold prices at the end of Q3 also encouraged gold retailers to replenish their stocks in expectation of continued healthy demand in the fourth quarter as they look ahead to the wedding season and year-end festivities
Indonesian jewellery demand rose by a modest 5% y-o-y. Improved consumer sentiment played a role, but rising inflation is starting to have an impact on discretionary spend in the region’s largest economy. Malaysia (69% y-o-y) and Singapore (61% y-o-y) also saw increases in jewellery buying during the quarter.
Rest of Asia
Jewellery demand in Japan was up 10% y-o-y at 5t. Consumers have adjusted swiftly to higher price levels. An improved COVID situation, a resumption of weddings and the continued success of sales via TV and online channels contributed to the growth in demand.
South Korea was an outlier in Q3: jewellery consumption fell 26% y-o-y to 3t on increasing signs of economic stress. The jewellery market is being affected by the domestic economic downturn and the uncertain international backdrop, while rising living costs and interest rates are dampening spending on luxuries.
Jewellery consumption in Australia increased 71% y-o-y to 2t. While this is a significant increase, the y-o-y comparison is made against a low base in Q3 2021 – a time when quite severe COVID restrictions were still in place. A y-t-d increase of 27% suggests the jewellery market in Australia remains robust, despite the backdrop of economic uncertainty.