The World Gold Council reported that gold jewelry demand was higher in the third quarter than in any quarter since 2010. Physical demand was far stronger for the first nine months of 2013 than for first nine months of 2012. Demand for gold jewelry in Hong Kong and China were 40% and 35%, respectively, above the levels set during the same nine months of 2012. So far this year, the East (primarily China and India) have purchased five times as many ounces of gold bars, coins and jewelry as all the nations in the West. China and India alone purchased 1500 tons of physical gold in nine months, which works out to a 2000-ton annual rate – or about 93% of the 2,142 tons of newly-mined gold projected for this year.
Jewelry demand is becoming more bullion-oriented, rather than being bought just for decorative or festive purposes. In China, jewelry buyers now often demand 24-karat gold jewelry (which is generally .9995 fine) or .9999 (“four nines” fine) gold bars. By contrast, the less popular 14-karat gold contains only 58% gold.
The government of India has put up every imaginable roadblock to gold investors – with taxes, tariffs and heavy regulations – but India’s gold jewelry demand in the first nine months of 2013 is still about 12% higher than in the first nine months of 2013, despite very high premiums of about 10% per Troy ounce. And that’s only the “official” sales of gold. Government regulations have caused a flourishing of the underground gold economy in India – namely, gold smuggling and off-book sales. The WGC says that gold is “entering the country unofficially through India’s porous borders helping to meet pent-up demand.”