Facing Facts: Global Gold Jewellery Demand Contracts in H1 Despite Strong Q2

Debajit Saha

By Debajit Saha
Lead Analyst, LSEG Metals Research

Gold jewellery consumption in Q2 remained higher by 6% compared to the corresponding quarter in the previous year; however, on an H1 basis, demand remained slightly lower by 3% compared to H1 2021.

The slowdown in economic growth in China due to strict COVID-19 restrictions impacted demand for gold jewellery hugely, offsetting the gain witnessed in India, other countries in Asia, and the Middle East markets.


China’s Consumer Confidence Index, which describes the consumers’ degree of satisfaction about the current economic situation and expectation on the future economic trend, contracted by 27% in H1, illustrating the extreme pessimism of Chinese consumers as the index value has never dropped below 95 in three decades. In an environment like this, consumers tend to save more. The contraction in the Real Estate Climate Index also illustrates that the expanding Chinese middle class has slowed down on high-end purchases at this point in time.


Source: National Bureau of Statistics of China, Refinitiv Eikon

Regarding jewellery demand, although traditionally Q2 always remains a relatively muted quarter, under the current economic backdrop, there was a no surprise that Chinese consumers preferred to hold back from jewellery purchases, inflicting a contraction of 25% to 99.5 tonnes on a year-on-year basis.

Looking ahead in H2, if the rising monthly withdrawal of gold from the Shanghai Gold Exchange (SGE) by banks and manufacturers is a kind of indicator, we expect jewellery demand to improve as the current price is highly attractive.

However, demand may still contract by 5% to 7% compared to the same period in 2021, as the broader economy still needs to perform to get consumers’ confidence back.


Although compared to a low base, India’s gold jewellery demand increased to 125 tonnes in Q2, registering strong growth of 56% on a year-on-year basis. The combination of wedding and festival purchases, supported by the rapid fall in price in May, accentuated robust demand. After a lull of two consecutive years due to the pandemic, consumers in India got the opportunity to buy gold physically during Akshaya Tritiya, an auspicious Hindu festival, when people buy gold for prosperity.

For H2, jewellery demand will be dependent on the revival of the rural economy and how India’s central bank handles inflation. The Central Bank has already followed the global trend and raised interest rates at its last policy meeting. It has indicated a gradual adjustment in interest rates going forward so that the economy does not feel the heat and, at the same time, inflation can be contained. Oil prices have also come down on the international market, which again helps.

India’s rural economy is still struggling to recover. High inflation has affected this sector the most. The south-west monsoon plays a pivotal role in India’s ‘kharif (monsoon or autumn crop) production. And so far, the monsoon has progressed well and kharif sowing has been going on in full swing, as reported by Parliament during the recently concluded monsoon session. If the monsoon ends well, the new kharif crop will bring in a lot of cheer to the rural population.

However, the Indian government has recently increased the import duty on gold, which has added 5% to the purchase price. This will be a factor to play in volume terms. Overall, however, we believe the demand may remain at par to slightly lower than last year’s level.


Jewellery demand in the rest of the Asian markets such as Thailand, Vietnam, Japan and Malaysia remained relatively stable, as the region saw the arrival of tourists after pandemic restrictions were lifted and respective governments took further measures to revive local economies, which encouraged consumers to invest in jewellery for festival, wedding and other related purposes in Q2. The correction in price in May also provided support.

The Middle East region witnessed good demand for gold jewellery, as the high oil price and a return of tourists contributed well to the local economy. Tourist demand was not so high in the gold ‘souq’ in the UAE, as only local consumers contributed to demand. Looking forward, we do not expect demand to rise hugely, as tourist demand will continue to remain subdued due to purchasing power being hugely eroded over the last few years.

Turkish demand had suffered due to hyperinflation and the subsequent rapid devaluation of the local currency against the US dollar. As the economy is still struggling, jewellery demand is expected to contract by 7% to 10% in H2.

In the West, there was almost no change in demand in America in Q2 on a year-on-year basis, while in Europe, demand contracted by 5% in Q2 on a year-on-year basis. High inflation coupled with a high gold price remained the main factors for the contraction.

In the West, there was almost no change in demand in America in Q2 on a year-on-year basis, while in Europe, demand contracted by 5% in Q2 on a year-on-year basis.

Unprecedented money supply to resuscitate economies from the after-effects of the pandemic in 2020 and 2021 has contributed to high inflation. It was aggravated further this year as headline inflation in developed and emerging economies has surpassed the threshold level of central banks’ targets. We have observed the first glimpse of slowdown of CPI in the US in the month of July, but it’s too early to assume that inflation has peaked.

The Federal Reserve has made it clear that it will continue its monetary tightening policy until inflation returns to normalcy. As the US dollar has strengthened and the real return in long-term US Treasuries turns positive, we may see gold consolidate in a range between $1,680 and $1,840, and at times come down below the lower band in H2. This will provide strong support to major physical markets, but demand may not match that of last year. We estimate that the full year demand will come in at around 1,765 tonnes, a fall of 3% from 2021.

Debajit Saha

By Debajit Saha
Lead Analyst, LSEG Metals Research

Debajit is a Lead Analyst at LSEG, based in Mumbai. He is responsible for precious metals research in Asia, Middle East. He has a bachelor’s degree from the University of North Bengal, India.