RAPAPORT… Gold jewelry production grew 23 percent in the first half of 2007 as price volatility dropped during the period, precious metals consultancy GFMS reported in the first update of its Gold Survey 2007.
“The consultancy feels a key driver of jewelry’s increase was greater price stability, particularly in the second quarter when price volatility fell to 12 percent from 31 percent one year prior," GFMS explained.
The survey noted that jewelry demand in India led the surge, rising by nearly 80 percent in the first six months. “Not all was merely a price response as off-take was further aided by robust economic growth," the consultancy said of the rise in demand in India.
Elsewhere, strong growth in gold jewelry manufacture was realized in the Middle East having increased 17 percent, while East Asia, and particularly China, were also mentioned as high growth areas.
Conversely, western countries experienced declines in jewelry fabrication as Europe battled to contend with overseas competition and a stronger euro which hurt output.
The United States posted a double-digit fall in first half jewelry consumption, “which was important for many countries as it fed through to a 13 percent slide in jewelry imports," GFMS reported.
Looking ahead, GFMS predicted that global gold jewelry production would continue to grow through the second half of 2007 and could rise by 6 percent year-on-year in the period.
Philip Klapwijk, GFMS’ executive chairman, cautioned however that “the timing and extent of any rally could alter that forecast for jewelry."
Gold Mining Production Up 3% – Global Shift
Also in the Gold Survey, GFMS reported that global gold mining production rose 3 percent in the first six months of the year.
GFMS noted a global shift in gold mining as production in Indonesia grew 83 percent in the first half, with China also posting strong growth to a total 129 tonnes in the period. China, the consultancy added, looks set to become the new world leader “especially if South Africa continues to decline." The survey reported that Australia showed the most significant rise in production which was accompanied by surging production costs at the country’s major mines.
The more traditional gold mining continents of Africa and Latin America both showed declines in production.
GFMS forecast that the second half might show a modest decline in mining production, due in part to an expected fall in Indonesian production, although for the year overall, a slight increase was expected.
Investor Sentiment Still Positive
The survey’s release coincided with gold breaking through the $700 an ounce mark which Klapwijk said suggests that “the second order effect of the crisis in global markets on gold investment has begun."
Fears of further losses in traditional investments, which are highly leveraged on a problematic sub-prime mortgage market, are pushing investors towards safe haven assets such as gold," he said.
In contrast, commenting on the impact of the sub-prime market crisis on gold investment during August, Klapwijk noted that “losses in other markets forced investors to move out of liquid assets, in order to raise cash and minimize exposure to risk, leading to bail-outs in gold.
GFMS said it expects investor sentiment towards gold to generally remain positive over the rest of the year and through to 2008, but noted that liquidations were possible in the short term, “particularly as continued crises in global markets could once again force speculators out of long positions in gold."