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If a currency can feel, the dollar feels vulnerable
By Veronica Brown
Reuters
Thursday, February 24, 2005
http://www.reuters.co.za/locales/c_newsArticle.jsp;:421d7dca:c3b11d36
3271e2f?type=businessNews&localeKey=en_ZA&storyID=7722316
LONDON --- Consumer demand for gold jumped 7 percent in 2004 -- the
first rise in four years -- with sharp price rises failing to deter
buyers, the industry-backed World Gold Council said on Thursday.
The outlook for 2005 pointed to weaker growth, however, as times
were harder and jewellery purchases less likely.
Global jewellery demand, accounting for a major share of
consumption, rose 7.5 percent in the fourth quarter of last year
compared with the year-earlier period, figures compiled for WGC by
consultants GFMS Ltd showed.
Jewellery demand for 2004 was estimated to be six percent higher
from 2003 at 2,673 tonnes.
"What we've seen in the past is that when the price rises people
tend to hang back from purchases. The reports we're getting show
that increasingly consumers expect prices to at least remain firm
and probably to rise," WGC economic adviser Jill Leyland told
Reuters.
"A lot of jewellery is bought as a form of savings, or even
investment. If you expect the price to rise, that will increase
desirability of the product," she added.
Bullion prices shot to their highest in 16 1/2 years in December at
$456.75 an ounce due to its inverse relationship with the dollar,
which plumbed record lows against the euro.
Analysts polled by Reuters in January expect the price to extend
gains in 2005.
Net retail investment grew 15 percent in 2004, with the China
Banking Regulatory Commission approval in late December for Chinese
banks to market retail investment products seen as a breakthrough.
Institutional investor demand was less buoyant, despite a positive
phase in the fourth quarter due to the launch of the New York-listed
streetTRACKS exchange-traded fund in November.
Institutional investment, including stock building and other items,
showed total net disinvestment of 124 tonnes in 2004 compared with
net investment of 653 tonnes in 2003.
"This largely reflects net disinvestment over the year
(notwithstanding the rise in Q4) by short-term speculative buyers
who had bought in 2003 and who sold their holdings when the price
fell back after the peaks early in the year," the report said.
"The scale of disinvestment was substantially lower than the amount
of purchasing in 2003, suggesting that many buyers had bought with a
longer-term perspective and held on to their investment."
On a regional basis consumer demand, including jewellery and retail
investment, rose 17 percent in 2004 in India -- the world's largest
gold market.
Leyland also said a "mini rush" had developed in rural areas of
India where people were living with the aftermath of December's
deadly Tsunami.
Leyland said distribution of financial aid to victims had prompted a
surge in gold jewellery in certain affected areas of Tamil Nadu -- a
key gold buying state.
"The reason is that people can wear the gold on their person so it's
secure...until they are able to use it more constructively," she
said.
Turkey retained its spot as the third biggest global consumer market
after India and the United States, with record annual jewellery
consumption and consumer demand.
Demand in major consumer China was up 13 percent in 2004, with
better designs and higher gold prices helping to brighten the
metal's allure.
United States jewellery demand was down slightly on 2003 in volume
terms, although value rose 12 percent.
"Retail spending in the U.S. was generally strong last year, but as
the year progressed became more fragile due to its reliance on
increasing household debt and to concerns about the future of the
economy," the report said.
Domestic demand from Italy, the world's biggest exporter of
manufactured gold jewellery, fell in the last quarter of 2004,
although a clear trend was seen there and in other western markets
for moving towards higher-end pieces.
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