Gold Jewelry Demand Waning, Warns Gold Group

Gold jewelry is losing its lustre — even in countries like India, where it has traditionally been central to religion, weddings and even social standing, says World Gold Council CEO Aram Shishmanian — and that could be a problem for the gold industry.

Sure, gold has regained some importance as safe haven thanks to the world financial crisis, but Shishmanian says the gold jewelry market will still play a major role in supporting the gold price — if people keep buying.

“We have lost the desirability of gold,” Shishmanian said during a breakfast talk at the Denver Gold Forum in Denver, Colo., last month.

Demand for gold jewelry has waned in developed countries over the past 50 years but now the same thing is starting to happen in countries like India, where Shishmanian has seen a shift in attitude toward the yellow metal.

“That relevance is disappearing. The 25-to 35-year-olds who are highly educated — many of them work in call centres — are not wearing gold jewelry,” Shishmanian said.

On a large screen behind him flashed a photo of a young stylish woman in jeans and a simple top holding an MP3 player. She’s not wearing any jewelry. That is the picture that the Asian markets and the Indian markets look at, Shishmanian says. Young adults don’t see the value in gold jewelry that their parents do.

“Their aspiration is the iPod, it’s the Gucci handbag, and that is a real issue for us,” Shishmanian says. “The iPod generation doesn’t see the relevance. This is particularly the case in the mature countries like North America and Europe.”

He says the World Gold Council needs to focus on maintaining the importance of gold in such societies.

“We’ve got to make gold really desirable and really ignite that passion,” he says. “I use these terms because it is about how you feel about it, it is not an economic decision.”

Shishmanian points out that in the U. S., there are high-end stores accessible to only the very rich — Harry Winston, Cartier, Bulgari — and then there is the mass commoditized market selling 14-karat gold or lower at discount prices.

“This is not the market we want to be in; it’s not the market we want to support,” Shishmanian said.

He suggests a creating a “middle ground” or a “premium market” to sell 18-karat gold.

Shishmanian admits that this is a huge and expensive task but if it’s not tackled, the market will continue to decline.

“In the U. K., the bulk of demand is nine-karat gold; in Germany, it’s eight karats,” he said. “We’ve got to reignite that desirability.”