Demand for gold jewelry has almost halved

Gold Jewellery

The demand for jewelry as an indicator for the development of the gold price has obviously had its day. In the first half of the year, the global demand for rings, necklaces and bracelets almost halved to 572 tons - but the gold price is still rising.

In India, the world's largest gold jewelry market alongside China, demand plummeted between April and June, according to figures from the World Gold Council (WGC): minus 74 percent. The wedding season that starts in autumn, when a lot of jewelry is usually given away, is also unlikely to save the annual balance. The lockdown restrictions have apparently taken away the desire to buy. In the current economically unstable situation, they shy away from visiting jewelers.

Growing influence of speculators

The fact that the gold price was able to climb above 2000 dollars per ounce for the first time this week shows the growing price influence of speculators who buy investment gold: coins, bars and, above all, ETC securities ("Exchange Traded Commodities") that are backed by physical gold . ETC providers have already acquired around 700 tons of the precious metal this year, roughly twice as much as in the entire previous year.

The global gold supply is likely to be around 4,700 tons in 2020. This means that the ETC providers have already bought around 15 percent of this year's offer. "That's huge," says Frank Schallenberger, precious metals expert at Landesbank Baden-Württemberg.

However, Schallenberger warns against continuing this trend. The demand from jewelry manufacturers, but also from central banks and industry, is comparatively weak, but these three sectors still account for around two thirds of the total gold demand. The precious metals expert expects it is quite possible that the market will remain "bullish" for a while. The ETC would "but hardly be able to keep up the pace of their purchases," says Schallenberger: "With that, the signs for gold are more likely to point to falling prices in the medium term."