Jewellery demand in India likely to fall 9 per cent in H1: GFMS

LONDON: Persistent concerns over the health of the US economy and pressure on the dollar will send gold prices to a record average high this year, Thomson Reuters GFMS said on Wednesday, before the metal’s 12-year bull run tops out late in the year.

Gold investment fuelled by negative real interest rates and debt concerns is seen driving prices higher in the first six months of 2013, it said, offsetting a dip in jewellery demand and a rise in mine and scrap supply.

GFMS forecasts that gold prices will average $1,775 per troy ounce in the first half of 2013, up from an average $1,685 in the second half of 2012, and well above the previous half-yearly record average of $1,693 set in the past six months of 2011.

It expects gold to average $1,847 per troy ounce in the full year, but monthly forecasts suggest it will peak in late 2013. Prices are expected to remain extremely elevated in the first half of 2014.

High prices weighed on demand from jewellers last year, particularly in price-sensitive Asian markets such as India, historically the world’s largest consumer of the precious metal.

Jewellery fabrication demand in the Indian subcontinent fell 11 per cent last year to 624 tonnes, and was down in almost every individual region. It rose 5 per cent in the West Asia, however.

Fabrication demand from India and its subcontinent is forecast to fall to 322 tonnes in the first half from 348 tonnes in the same period of 2012.

Indian jewellery demand is expected to dip 9 per cent in the first half, leaving it at a four-year low.

Fabrication demand in east Asia, which includes China and smaller markets such as Hong Kong, Taiwan, Vietnam and Malaysia, is expected to dip just over 2 per cent to 465 tonnes.

Chinese jewellery fabrication demand fell in 2012 for the first time in nine years, though by only 1 per cent.

Chinese fabrication demand failed to take over from that of India, still the world’s biggest overall gold consumer, as it had been forecast to do.

“Though we expect this year that China could take on a firmer tone, we’re still concerned about prospects for India,” GFMS’ head of research Philip Klapwijk said. That has provided a slightly less secure floor for the price, as opposed to a rising floor.

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