Majority of world’s gold used in jewelry-making

Jewelry fabrication accounts for almost 60% of the gold coming on the world market, with industry, small bars and coins taking up their fair share of the precious metal.

British author Timothy Green, writing in the 1986 annual report of gold-producer Echo Bay Mines, estimates 25-to-30 million oz of the world gold output is used in making jewelry, out of the approximately 50 million oz (at $400 an ounce, that’s a market worth $20 billion) extracted annually by companies of both the communist and non-communist worlds. (Non- communist producers account for more than 40 million oz.)

Historically, gold’s value has been monetary in nature, with much of it finding its way into coins and government reserves. During the past 20 years, however, “a rising tide of private buying for jewelry, industry and investment has transformed the gold market,” he writes. Now the metal is viewed more as a commodity, especially one that attracts individual investors.

People buy jewelry for different reasons. “In North America or Europe or Japan you may buy a piece of 10, 14 or 18 carat jewelry primarily for adornment, paying between three and four times the value of the gold content,” he writes.

“By contrast, throughout North Africa, the Middle East, India and southeast Asia, people still buy 21, 22 or even 24 carat gold ornaments primarily for investment on very low markups of only 10-to-20% over the gold price of the day. “This `investment’ jewelry is the basic form of saving for millions of people in developing countries where banking systems, savings schemes and stock markets are not available or are not trusted by most of the population.”

Mr Green estimates “investment” jewelry accounts for 25% to 35% ($5 to $7 billion of the market) of the world’s annual gold production.

Industrial demand, particularly in electronics and dentistry, is worth another $3 billion.

Mr Green estimates up to 20% of all new gold, about $4 billion worth, “is tucked away in bars under beds, in cellars or in safety deposit boxes around the world.” The Far East, and especially Japan, is now sporting big buyers of gold bars.

The bullion coin is proving more and more popular (gold coins worth $4 billion were minted worldwide in 1986) and Mr Green sees no sign of that trend reversing.

“The advantage and appeal of this new generation of gold coins is that it enables even the small investor with only a few hundred dollars to buy gold very close to the spot price, in the knowledge that he can re-sell worldwide with quite a narrow spread and at a clearly posted price,” Mr Green writes.