Demand for Gold Jewelry Forecast to Decline in 2007

London-based precious metals consultancy GFMS forecast that world gold jewelry demand would decline in 2007. This follows a 16 percent drop in gold jewelry demand in 2006.

The company made the prediction in its latest report on the gold market, Gold Survey 2007, released Wednesday in London, Toronto, and Johannesburg.

GFMS reported that jewelry production across the globe fell to a 15-year low in 2006 to 2,280 tons, a drop of 428 tons from 2005.

The level and volatility of the gold price during the first half of 2006 were chiefly responsible for the decline. Jewelry demand in the first six months of the year dropped 29 percent year-over-year, while remaining almost unchanged in the second half of the year.

Three countries, India, Turkey, and Italy accounted for half of the gross decline in jewelry demand last year, with close to a 90-ton drop in demand from India alone. GFMS cited weak exports to the U.S. for the lower Turkish figure.

“The extent of the price increase last year affected both price sensitive and western-style, high markup, markets, such as the U.S., where we saw a shift to lower gold weights and more gemset jewelry, both of which hit gold demand,” said Philip Klapwijk, GFMS Executive Chairman.

Experiencing continued growth, China became the world’s second largest manufacturer of jewelry in 2006 after India, according to GFMS.

Although it predicts world jewelry demand will decline in 2007, GFMS says the drop is likely to be smaller than in 2006.