JEDDAH, 20 August — Despite the global economy slowdown, gold demand remained high in the first half of 2001. The positive trend was reflected in Saudi Arabia where gold demand rose by nine percent during the period.
Recent statistics released by the World Gold Council (WGC) show that the Kingdom’s gold offtake in the second quarter is nine percent higher than in 2000 with over 60.5 tons sold. “This has been due to positive moves by the Kingdom to reduce import duty, provide an increase in tourist visas boosting the number of pilgrims, and launch of its first-ever commercial gold coin combined with staging of the inaugural comprehensive gold festival in the Western Province called ‘Jeddah the gateway to gold.’ All of these initiatives have been underpinned by a healthy economy and strong marketing drives in the Kingdom,” the WGC states in its half-year review.
While growth was hampered in the first quarter by the absence of Eid Al-Fitr, which has moved forward into the fourth quarter, the stronger second quarter results have brought overall growth for the first half-year to 124 tons, two percent higher than in 2000, the report stated.
According to the WGC, Bahrain, Qatar, Kuwait, the United Arab Emirates and Oman registered a record-breaking second quarter in gold sales of 45.6 tons or eight percent increase over the same period last year. This positive trend follows a similar record-breaking increase of 14 percent in the first quarter.
“This reflects the general trend of a strong second quarter for gold purchases throughout the Middle East with demand rising 10 percent to 139.7 tons. The high oil prices of recent periods have boosted economies and consumer incomes, while strong promotionally led strategic marketing tactics such as the Dubai Summer Festival’s ‘City of gold’ campaign have created a buying boom. Although positive growth was slightly upset in the month of May by a slight price spike, demand is considered to be buoyant in the Gulf,” WGC stated.
Much of the overall rise in the Gulf, excluding the Kingdom, was accounted for by the UAE, where sales rose by 13 percent to 27.5 tons. The smaller Gulf states presented a more mixed picture with rises of five percent and 11 percent respectively in Kuwait and Oman, offset by falls of four percent and 15 percent respectively in Bahrain and Qatar.
On a worldwide scale, gold demand held up in the first half of the year despite the global economic slowdown. For the six months as a whole, gold jewelry sales and personal investment in the world’s leading gold consuming countries was 1,601 tons, one percent higher than a year earlier. The first quarter was strong with demand six percent higher year on year. Demand in the second quarter was dampened by economic problems in specific countries, falling three percent from a year earlier to 764 tons, according to the review.
Despite these conditions, there was encouraging growth during the second quarter in several key-consuming countries of this region. These included Egypt, where demand rose by 13 percent, the Gulf eight percent and India where demand stayed strong at seven percent growth.
In contrast, the global economic slowdown tempered demand growth in Southeast Asia. In a few countries, local economic conditions brought a sharp fall in demand. They include Turkey (down 72 percent), Taiwan (down 47 percent), Pakistan (down 19 percent) and Japan (down 18 percent). One other factor given for dampening growth slightly in some areas is the rising local currency prices in many markets.
WGC Regional Director Moaz Barakat commented: “Gold demand in the region is linked to both prevailing economic conditions and a strong affinity to gold. Growth is holding up in the key markets of India and the Middle East. As always, we’re increasing our efforts to stimulate the purchase of gold across the region so that we can see further positive impact on gold on a global scale.”
The review highlights that jewelry demand remained stronger than investment. Jewelry consumption in the second quarter of 684 tons was just two percent below year-earlier levels with purchases for the full half-year of 1,428 tons, two percent higher than the first six months of 2000. Investment demand at 80 tons was 14 percent below year-ago levels, although the fall was exaggerated by the exceptional demand for a commemorative coin in Taiwan in the second quarter of 2000. For the first half-year investment demand of 173 tons was eight percent below year-ago levels.
The review points out that in the second quarter gold demand in India reached 235.8 tons, seven percent higher than a year earlier and establishing a second quarter record. Together with revised data for the first quarter, when offtake is now estimated to have been 29 percent higher than a year earlier, demand for the first half year totaled 490.4 tons. This was 17 percent higher than the relatively weak first half of 2000. Following the reduction in import duty from 400 rupees to 250 rupees per 10 gm announced at the end of February, unofficial imports fell sharply with more gold being channeled through official routes. In the second quarter official imports were 33 percent higher than a year earlier — compared with the seven percent increase in total demand, with unofficial imports falling to around one-third of year-earlier levels. For the six months as a whole, official imports were 34 percent higher than in the first half of 2000. Demand for the second quarter, like that for the first three months of the year, was initially boosted by a substantial number of marriages and other festivals.
This contrasted with the experience in the year 2000 when the number of marriages was sharply reduced due to an abnormally low number of auspicious days for weddings in the calendar year, and possibly, factors such as the effect of the fall in the stock market on urban incomes and the aftermath of the Gujarat earthquake. Provided the monsoon continues to be good boosting harvests and hence rural incomes, demand for the rest of the year look promising, according to the review.
In contrast to India gold demand in Pakistan in the second quarter was 19 percent lower, at 21.8 tons, than a year earlier. Over the first half year as a whole, demand was seven percent lower than in the first six months of 2000, the WGC stated.
In China second quarter demand at 49 tons was seven percent higher than a year earlier in the same period with a three percent increase in gold jewelry demand. In Hong Kong gold demand rose 10 percent year-on-year in the second quarter to reach 5.5 tons — all in jewelry. Slower economic growth in South Korea held gold demand to 30.5 tons in the second quarter, marginally lower than a year earlier. In addition jewelry demand — four percent lower than a year earlier at 27 tons — was dampened by the leap lunar month of April, which in Korea is viewed as inauspicious.
The second quarter saw year-on-year growth in gold demand in four of the five countries in the Southeast Asia region — 21 percent rises in Vietnam and Singapore and more modest five percent increases in Malaysia and Indonesia. However, demand fell 25 percent in Thailand, restraining overall demand to 57.7 tons, two percent higher than the second quarter of 2000. Demand for the first half year reached 133.8 tons, up four percent, with jewelry demand rising six percent but investment demand falling two percent.
Gold demand in the US rose four percent in the second quarter reaching 80.5 tons and bringing the total for the first six months to 173.9 tons, up five percent. Jewelry demand showed a further rise, three percent year-on-year, in the second quarter setting a further record for the quarter but with some evidence of the effect of the economic slowdown becoming apparent. Investment demand more than doubled but this was from a very low level in 2000.
Demand in the Latin American region rose by one percent in the second quarter to 35.5 tons, narrowly reaching a new second quarter record.
While UK demand remained buoyant, the faltering eurozone economics held down second quarter gold demand in Europe to 56.8 tons, slightly below year-earlier levels. There was a modest rise in jewelry demand offset by a fall in new coin purchases. In Germany the trend toward yellow gold continued in the second quarter but this was mainly at the expense of white gold rather than platinum. Consumer confidence in France slowed sharply in 2001 as a result of concerns over economic slowdown, slower job creation and anxiety over the introduction of euro notes and coins at the beginning of 2002. This has had an effect on gold jewelry sales, which fell five percent to 13.1 tons, a slightly greater fall than in the first three months of the year.