Jewelry demand will drive global gold consumption growth over next two years - report
(Kitco News) - According to data by the Australian Government’s Department of Industry, Science, Energy and Resources (DISER), world gold consumption is forecast to increase by 8.7% to 4,057 tonnes in 2021, and to grow at an average annual rate of 5.7% in 2022 and 2023, to 4,535 tonnes in 2023, largely driven by jewelry consumption.
According to the report, in 2021, jewelry demand is forecast to rebound strongly from the heavy reduction in 2020, up 32% year-on-year, to 1,855 tonnes. China is expected to contribute the most to this recovery.
“Government stimulus, sales promotions and seasonal patterns are expected to lift gold demand in the second half of 2021. In the US, gold jewelry consumption grew by 55% in the first-half of 2021, and is expected to remain strong over the rest of 2021, driven by an effective COVID-19 vaccine rollout, improved consumer sentiment and high household savings,” DISER said.
In Europe, jewelry consumption is expected to be weak, as the Eurozone economies continue to struggle with the COVID-19 pandemic. In India, a poor monsoon season is likely to affect the economic recovery in rural regions, and thus the demand for gold during the wedding and festive season starting in October 2021.
In south-east Asia, surges in COVID-19 cases are likely to reduce gold demand in the September quarter 2021. On 21 May 2021, the Russian government tabled legislation that allows the country’s national wealth fund to buy and hold gold with the Russian central bank. This is likely to result in higher Russian holdings, the authors of the report noted.
Importantly, DISER pointed out that the global gold consumption is forecast to grow at an average annual rate of 5.7% in 2022 and 2023, to 4,535 tonnes in 2023. The growth is expected to be largely driven by jewelry consumption, which is forecast to rise by 9.1% a year in 2022 and 2023, to 2,208 tonnes in 2023.
“Jewelry demand from China is expected to remain strong, supported by rising consumer sentiment and income. Demand from India is expected to recover in 2022 and 2023, as more people are vaccinated and the economy recovers,” DISER said.
Moreover, gold retail investment is expected to help global gold consumption, with demand for gold bars and coins forecast to rise at an average annual rate of 1.0% between 2022 and 2023, to 1,207 tonnes by 2023.
DISER added that many central banks are expected to shift their focus from accommodative liquidity requirements — to support economic growth during the COVID-19 pandemic — to reserves diversification — to help protect their wealth.
“As a result, central bank gold buying is forecast to rise by an average 9.2% a year over the outlook period, reaching 600 tonnes in 2023,” the report projected.