India shines in jewellery fabrication sector

Global jewellery fabrication has increased by over 5 per cent to 2,610 tonne in 2004, according to the recent report published by GFMS Limited.

Although this is the second highest increase in two years, it is still considerably below the 1997 peak of 3,300 tonne. The rise was despite the dollar gold prices increasing by almost 13 per cent last year.

India, specifically, witnessed a 16 per cent rise in the fabrication sector despite a 9 per cent rise in local gold prices and a poor and erratic monsoon last year.

Nevertheless, the recovery in Indian jewellery fabrication owed more to the widespread acceptance of gold prices in excess of $400 per troy ounce.

In fact, every region saw higher jewellery fabrication last year with the exception of Europe and North America. Lower Italian production, by around 22 tonne was the principal cause of the close to 6 per cent fall in Europe.

This was largely due to weaker export markets, particularly in the United States, where jewellery consumption fell for the third year in a row.

This also accounted for the 8 per cent decline in the US manufacturing, which has now fallen for four years, with losses of nearly 50 tonne from its 2000 peak.

However, the double-digit gains in India, as well as in other countries like Turkey and China, more than offset these losses.

It was also further aided by higher production in many other markets.

Another important factor was the growth in the gross domestic product (GDP) in number of key consuming markets. Strong GDP growth and acceptance of higher prices also contributed to good growth in fabrication across much of the Middle East and East Asia.

Also, in 2004, scrap volumes decreased, thus pushing the new gold demand by 10 per cent and in the process, nearly making up for all the losses suffered the year before.

In 2003, the jewellery fabrication sector, excluding the use of scrap had slumped to a 14-year low, partly due to higher scrap supplies.

This increase in jewellery fabrication excluding the use of scrap is considered a more accurate indicator to the jewellery market's call on the international gold market in terms of new bullion required for manufacturing.

The year 2005 is considered to have started brightly, confirming that many price sensitive markets have acclimatised to dollar prices in the $420-$435 region, stated GFMS.

In addition, gold prices below $410 are at the lower end of the range, and this is considered a strong buy signal.