New Gold Investor Report Highlights How Rising GDP Drives Consumer Gold Demand
Published 24 September, 2014
“The growth dividend: how rising GDP lifts consumer gold demand” – one of a series of papers published today by the World Gold Council – highlights how gold demand benefits at all stages of the economic cycle, including in times of expansion as well as in times of duress.
Juan Carlos Artigas, the paper’s author and Director of Investment Research for the World Gold Council, said: “Conventionally, investors have viewed gold as an asset they should buy when risks increase, such as during times of inflation, economic uncertainty, political unrest or currency depreciation. Gold is unique in that it also benefits from periods of economic expansion when there is typically stronger consumption of technology and jewellery, which together represent more than half of global gold demand. This demonstrates the resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect the economic environment.”
The paper features research from Avinash Persaud, Chairman of Intelligence Capital Limited and noted global markets expert. His analysis illustrates the positive relationship between economic growth and consumer demand for luxury goods like gold jewellery.
It also notes that economic expansion is a boon for technological and healthcare innovations that use gold components, such as advanced digital devices or medical treatments. Both technology and jewellery related demand and global economic growth are closely related, for every 1% of additional gross domestic product (GDP) technology and jewellery demand rise by 5%.
Jewellery and technology together account for 58% of global gold demand—far greater than the 35% of demand driven by investments in bars, coins and gold-backed ETFs. Accordingly, gold offers a strong, pro-cyclical link to consumer demand in addition to its customary counter-cyclical link.
“The vast majority of gold demand is not for speculative or investment purposes, but for the more [commonplace] and deep-rooted purpose of fabrication of gold into jewellery or decoration. The level of investment demand is much smaller than jewellery demand…,” Dr. Persaud’s research finds. “The gold market is large [and] annual gold demand is approximately US$175 billion to US$200 billion – greater in size than the entire European luxury goods market.”
According to the latest edition of Gold Demand Trends, the quarterly report published by the World Gold Council, US jewellery demand saw a fifth consecutive quarter of growth between April and June. UK consumers remained similarly upbeat, with jewellery demand for the first half of the year climbing 25%.
Two additional papers, Ten years of gold ETFs: a wider and more efficient market and A practical hedge: less exotic, multipurpose, lower cost were also published today as part of the Gold Investor report.
The full report can be downloaded at http://www.gold.org/investment/gold-investment-research.
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Note to editors:
World Gold Council
The World Gold Council is the market development organisation for the gold industry. Working within the investment, jewellery and technology sectors, as well as engaging in government affairs, our purpose is to provide industry leadership, whilst stimulating and sustaining demand for gold.
We develop gold-backed solutions, services and markets, based on true market insight. As a result, we create structural shifts in demand for gold across key market sectors.
We provide insights into the international gold markets, helping people to better understand the wealth preservation qualities of gold and its role in meeting the social and environmental needs of society.
Based in the UK, with operations in India, the Far East, Europe and the US, the World Gold Council is an association whose members include the world’s leading and most forward thinking gold mining companies.