Dubai: Oil seems to have spoilt gold’s prospects for Middle East shoppers during 2015, with regional demand dropping to its lowest since 2012 to 224.1 tonnes.
“Further falls in the price of oil and continued conflict across the region have fed through to declines in gold jewellery consumption,” The World Gold Council (WGC) reports. “Declining tourist revenues were an added factor in the UAE.”
Even the fourth quarter offtake across the region was underwhelming, down 5 per cent to 51.4 tonnes. Surprisingly, demand in Iran was particularly strong as the market “continued to draw strength from the thawing of relations with the West. Optimism over the removal of sanctions drove double-digit gains in both investment and jewellery (30 and 11 per cent, respectively),” WGC reports.
“Positive sentiment outweighed the drag from lower oil prices and the 9 per cent VAT (value added tax) levy on gold.”
According to Joy Alukkas, Chairman and Managing Director of Joyalukkas Group, demand during the first weeks of this year remain shaky. “Consumer sentiments overall is not positive at this point in time,” he said. “Even though the price was low and attractive, we did not see an overwhelming response for jewellery sector in the beginning of the year.
“We generally set three tiers of targets for growth and I must say we managed to hit only the lowest tier. This would be thanks to the promotional offers and the range of new collections.”
China (taking in 985 tonnes) and India (849 tonnes) remained the two dominant market for gold, and accounting for nearly 45 per cent of total global gold demand last year. Annual consumer demand in these markets were up by 2 and 1 per cent, respectively.
Among the key categories dictating demand, global investment-led buying was up by 8 per cent to 878 tonnes from 815 tonnes in 2014. Bar and coin demand held ‘steady as investors took advantage of a weaker price in Q3,’ WGC notes. ‘The ETF (exchange traded funds) market saw a slowdown in outflows: 133 tonnes in 2015, compared to 185 tonnes in 2014.’
Meanwhile, overall jewellery demand for 2015 was 3 per cent lower to 2,415 tonnes from 2,481 tonnes a year ago. “The third and fourth quarters combined produced the strongest second half-year total in 11 years,” according to WGC.
Central Bank demand for the full year was up from 2014’s 584 tonnes to 588 tonnes “as the need for further diversification was reinforced by a tumbling oil price and reduced confidence in the global economy”.
In its projections for early 2016, WGC states: “The global outlook for Q1 is mixed, but – barring any sudden and unexpected negative developments – we would expect year-on-year growth in Q1 given the weak start to 2015.”
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