Rising demand for gold jewelry a bullish sign

Despite the recession in North America, demand for gold to fabricate jewelry reached record levels last year and may even have climbed as high as 2,000 tons, according to estimates by the World Gold Council.

The New York-based organization, which is supported by 70 gold producers in 14 countries, says demand for gold jewelry also exceeded newly mined supplies in the western world for the third year in a row.

While western world gold production remained steady last year at between 1,750-1,800 tons, demand from the jewelry industry has risen to around 2,000 tons from 1,986 tons in 1990 and 1,874 tons in 1989.

“These are preliminary figures and the final demand figures could vary,” said Dr. David Gulley, chief economist and international manager of the Gold Council’s Gold Economics Service. “However, jewelry demand (which accounts for about 75% of total demand for all gold) will undoubtedly comfortably exceed Western mine production, and may even have set a new record.” Coin sales and western bar hoarding accounts for about 17% of total demand. The Gold Council says the strength of gold jewelry demand is broadly based and has grown more than 60% in the last five years. In 1991, aggregate consumption grew in Western economies and also in a number of emerging and newly industrializing markets, particularly southeast Asia. The council says it believes that China, despite its extensive gold mining industry, was a net importer of gold in 1991.

As well, consumer demand for finished jewelry remained strong, with the four largest European markets (Italy, Germany, France and the United Kingdom) demonstrating an estimated 3% increase in consumption and Japan 5%. In the U.S., jewelry sales are expected to be within 1% of the record 221 tons sold in 1990.

“These are staggering figures if you recall that we’re in a recession,” said Gordon Parker, Chairman of Newmont Mining (NYSE), North America’s largest gold producer. As a result of increases in disposable income and faster growth in the Third World, Parker expects jewelry to account for far more than 75% of total demand.