Gold set to restore consumer appeal

Demand for gold jewelry in China will pick up slightly in the second half of this year as prices ease from their first quarter high level, experts said on Thursday.

"In the first half of 2022, the global gold market was supported by macroeconomic factors such as rampant inflation and geopolitical uncertainty, but it also faced headwinds from rising interest rates, coupled with an almost unprecedented surge in the value of the US dollar," said Louise Street, a senior analyst at the World Gold Council, or WGC.

"While prices eased from exceptionally high levels in the first quarter, gold has been one of the best-performing assets so far this year.

"Looking ahead, we see both threats and opportunities for gold in the second half of this year.

"Safe haven demand will likely continue to support gold investment, but further monetary tightening and continued dollar strength may pose headwinds. As many countries face economic weakness and the cost-of-living crisis continues to squeeze spending, consumer-driven demand will likely soften, although there should be pockets of strength," she added.

The WGC predicts that although gold jewelry demand will pick up slightly quarter-on-quarter in the third and fourth quarters, it is still expected to see a double-digit year-on-year decline for the second half.

Roland Wang, regional CEO of WGC (China), said at a media conference on Thursday that a few gold wholesalers in Shenzhen are ramping up jewelry production in expectation that demand for the precious metal may rise in the second half, as prices are much lower now compared with those in the first quarter, and the COVID-19 pandemic is under greater control.

Some wholesalers are also increasing their stock as many did not buy sufficient amounts in the first quarter, Wang said.

Demand for gold jewelry in China dropped 17 percent year-on-year to 281 metric tons in the first half of this year, impacted by the COVID-19 pandemic, said a report released by the WGC.

The pandemic has had a significant impact on gold jewelry retail as consumers tend to make purchase decisions after trying items on at offline stores and wearing them during gatherings, while the pandemic requires social distancing, according to the WGC.

Sales of gold coins and bars were 87 tons in the first half, a year-on-year decrease of 40 percent, WGC data showed.