Gold Jewelry Fabrication Expected to Fall by 20% in H1 2008

Gold jewelry fabrication is expected to fall by around 20 percent in the first half of 2008, according to a report released by GFMS. The group’s chairman, Philip Klapwijk, also said that jewelry fabrication rose by over 5 percent in 2007, in spite of dollar gold prices having risen by 15 percent.

Looking ahead, Klapwijk noted that, “the continued rise in gold prices, together with the volatility we are now seeing, is expected to see jewelry demand fall sharply. At the moment, we are forecasting a drop of some 20 percent over the first six months. And if prices continue to rise, as we expect them to, then the second half could be similarly affected.”

The report reveals that in the first half of 2007 demand - excluding scrap - rose by 44 percent year-over-year, an outcome that was flattered by the extremely poor first half 2006 performance. In contrast, the last six months of 2007 witnessed a drop of around 12 percent.

The most pronounced rise in jewelry, on a regional basis, was achieved in the Middle East, where jewelry demand grew by nearly 70 tons. Much of this growth was due to Turkey, which enjoyed both higher local and export sales. The country was also helped by relatively stable gold prices, which were just 4 percent higher in 2007 (based on the annual average).

East Asia posted the second highest rise in terms of weight. This performance was overwhelmingly due to a healthy return from China, the result of rising local consumption, itself mainly the product of continued rapid income growth.

A brief look at the western-style jewelry markets last year reveals a modest decline in Italy, principally due to the continued shift in favor of gem-set and lower gold containing products, in markets such as the U.S.

The U.S. market was also affected by an increasingly uncertain consumer climate, partly due to the effects of the sub-prime crisis.