Jewellery demand may have seen golden age-analyst
PRAGUE, June 16 (Reuter) - The early 1980s and early 1990s will prove to have been a golden age for jewellery demand and the next 10 years are likely to be considerably tougher, delegates at the Financial Times Gold Conference heard on Monday.
Tony Warwick-Ching, senior metals market analyst at CRU International said, ``I believe the record (of jewellery demand) prompts a residue of optimism heavily tempered by caution.''
He said the prospects for international economic growth appeared to be good and as income played a part in jewellery demand, there were grounds for hope for demand growth.
But caution came from two of the three dynamoes of demand in the past two decades no longer applying to the market.
Liberalisation of gold trading was no longer as significant as it had been and there was less scope for a fall in gold prices than there was in the 1980s.
``Demand growth will be most robust in countries recently embarking on the liberalisation road and taking it gradually like India (has done),'' he said, adding that increasing demand would be strongest where liberalisation was accompanied by rapidly rising incomes.
``Such places are few and far between,'' he said.
Demand has recently revived in the CIS countries and Vietnam which recently started a gold trade liberalisation programme.
Jewellery accounts for 80 percent of all gold end use and growth in demand seems to correlate only with rising gross national product, he said.
But even then, the correlation was not as strong as might be expected, he cautioned.
At the top end in terms of gold bought per capita were a small clutch of prosperous states like Kuwait. Further down the scale are India, China and Indonesia in the same sort of area as ItaLy followed by the United States which is ahead of Japan, Germany, France and the UK.
Jewellery demand boomed in the past two decades with Western world demand recording 11 percent per annum growth since 1980.
But the 1980s were an exceptional time coming after the lowest ebb in jewellery demand, falling gold prices and reviving economies following the second oil price shock.
Growth in the developed markets since 1980 was seven percent annually but the longer term growth is only 1.5 percent since 1968. Worldwide it was more like 3.1 percent a year for the longer term making future growth of three percent a ``pretty good long term target to achieve,'' he said.
The developing market grew at 4.4 perent annually during the same period but featured wide variations.
There is evidence of slippage in the competitiveness of jewellery against other attractions for consumers and investors and both developed and developing markets show signficant price sensitivity.
Indian demand has been booming but it is extremely price sensitive and has been a huge market for gold for centuries.
Prospects in South East Asia and the Middle East were good but price sensitivity was a key factor.
Slower growth could be expected in the Far East especially since the booming Chinese demand of earier this decade has diminished.
Jewellery demand will increasingly rely on higher incomes and stable gold prices in the face of competition from an ``avalanche'' of other consumer and investor products.
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