The Largest Jewelry Market in the World

The largest jewelry market in the world is India, where consumption has fluctuated roughly between 500 and 600 tonnes a year over the past decade, depending on the price. It is said that Indians hold about 15,000 tonnes of gold, mainly in the form of jewelry. A sizable portion of the demand in India comes from rural parts, where jewelry is foremost a saving instrument.

China has recently moved into second place globally in terms of gold jewelry consumption,after recent growth lifted demand in 2007 to just over 300 tonnes. In contrast, the recent economic and financial crises in the United States, on top of structural change, have meant poor demand for luxury products like jewelry, pushing the United States to third place as demand fell to only about 260 tonnes in 2007. The remaining two in the top five consumers are Turkey and Saudi Arabia. In Turkey, the earthquake of 1999 and the banking crisis of 2001 had adversely impacted domestic demand till 2002. Recovery of the Turkish lira, along with far greater economic and financial stability, has since aided the revival of demand.

If we review global ranking in terms of where the jewelry is produced, the top two stay unchanged,but Turkey moves up to third place while Italy claims fourth. The latter used to be number two, but structural change and market share loss (mostly to Turkey and south-east Asian countries) for its exports in the United States have seriously undermined its output. Fifth place again goes to Saudi Arabia.

Jewelry consumption is critical to the overall gold market as it is the single largest physical user of the yellow metal, typically accounting for about two-thirds of the total demand for gold. Despite this fact, jewelry often plays second fiddle to investment (and on occasion other elements of supply and demand) as the most important determinant of the gold price due to its price sensitivity. Jewelry is best seen as a price taker rather than a price maker, tending to expand or contract depending on the price of gold and therefore acting as a “cushion” for the other supply and demand variables.