Global demand for jewellery fell to its lowest on record in 2020, pinned down by a combination of challenges such as the Covid-19 pandemic and high gold prices amid an economic slowdown, revealed the World Gold Council (WGC). 

Data from Gold Demand Trends 2020, released recently by WGC, showed that total jewellery demand last year shrank by 34 per cent to 1,411.6 tonnes. Consumption in the fourth quarter of 2020 was down by 13 per cent to 515.9 tonnes – another record low.

Gold price increases throughout the year meanwhile lifted demand in value terms, with Q4 figures growing by 11 per cent to US$31.1 billion.

WGC data showed gold prices reached US$1,887.60 per ounce as of December 30, 2020 from US$1,514.75 per ounce during the same period in 2019. Prices peaked in August last year to US$2,067.15 per ounce. 

During the first half of 2020, the value of jewellery demand fell to an 11-year low of US$29.6 billion but saw a sharp recovery to US$51.6 billion in H2. 

“The steep increase in the amount that consumers were prepared to spend on gold jewellery could be indicative of diverting expenditure away from experiences such as travel, restaurant meals, theatre tickets etc, towards consumer goods. Such trends were noted in some markets,” the report said.

While demand volumes are likely to remain subdued due to Covid-19, mass vaccination programmes and signs of economic recovery may indicate “continued, if tentative, improvement in the sector in 2021.” According to WGC, India and China helped fuel improvements in Q4, adding that meaningful recovery in either market will bode well for global demand moving forward. 

China

Jewellery consumption in China during a traditionally strong period for gold dipped by 35 per cent to 415.6 tonnes in 2020 – the lowest annual total for China since 2009. Despite China’s economy staging a comeback in Q4, with a 6.5 per cent year-on-year GDP growth, high gold prices and regional Covid-19 outbreaks in some areas weighed on demand. 

Business constraints brought about by the pandemic, coupled with structural changes and a continued shift in young consumers’ preference towards lighter products, weakened gold jewellery demand.

Heritage gold jewellery products performed strongly in 2020, particularly among high-end consumers whose incomes were less impacted by the pandemic. Pent-up bridal jewellery demand also supported robust interest in Chinese culture-inspired pieces.

Younger buyers meanwhile continue to gravitate towards lighter, hard-24-karat gold jewellery in modern designs since these are more affordable and trendier. 

India

In India, demand sank by 42 per cent to 315.9 tonnes in the previous year, but losses narrowed significantly in Q4 to an 8 per cent year-on-year decline mainly due to domestic economic revival and improving consumer sentiment.

Festivals and weddings in Q4 also bolstered jewellery demand. During Dhanteras – considered to be an important gold purchase festival – footfall and gold jewellery volumes improved further, exceeding local industry expectations.

Demand for bridal jewellery arising from rescheduled wedding celebrations also drove business in Q4. “But, with higher gold prices, consumers preferred gold-for-gold exchange for wedding purchases,” WGC said.

Despite improvements in Q4, some indicators point towards a fragile and compartmentalized recovery. “Any continued quarterly improvement in jewellery demand is likely to be tentative. Indian consumers remain sensitive to changes in the gold price – particularly at such historically high levels – and this could generate a rapid response to any price volatility,” noted WGC.