Total value of gold jewellery also drops, totalling £736m.
The World Gold Council (WGC) has released its gold demand trends for Q4 2012 and the full year 2012, with annual global gold demand reaching a record value of US$236.4 billion (£152.4bn), despite a 4% year-on-year drop in tonnage.
The fourth quarter of 2012 proved to be the strongest for global jewellery demand since Q1 2011 as India and a number of Middle Eastern markets drove a recovery in the sector. The Q4 value of gold jewellery demand was 13% higher year-on-year at $29.1 billion (£18.7bn).
In the UK, Q4 gold jewellery consumer demand dropped 5% year on year to 10.7 tonnes, with a value of $591 million (£380m).
In annual terms, 2012 registered a 3% decline in global jewellery demand on a volume basis to 1,908.1 tonnes, primarily due to a relatively weak year in India.
Conversely, the value of jewellery demand reached a record of $102.4 billion (£66bn) last year, 3% above 2011 with consumers spending greater amounts on gold jewellery, despite the 6% year-on-year rise in the price.
In the UK, however, both value and volume fell, with the UK’s total annual value of gold jewellery dropping 2% to $1,143 million (£736m). UK gold jewellery demand fell 7% last year compared to 2011, with 2012 demand totalling 21.2 tonnes.
China and India remain the two largest jewellery consuming markets for hold, together generating 56% of annual gold jewellery demand.
In other Far Eastern markets, gold demand was notably weaker with Thailand, South Korea and Vietnam all recording double digit declines in their annual gold demand totals
Western markets recorded "further erosion of tonnage", caused by consumers reacting to higher prices during a prolonged period of economic distress. In Europe Italy suffered the largest decline of these markets, down 15% to 23.5 tonnes as the state of the economy dented demand. Silver tonnage has been gaining in Italy, though the WGC notes that the majority of this silver will be in the form of gold-plated jewellery, confirming the desirability of pure gold jewellery which is being undermined by affordability.
Russia, Egypt and Turkey also recorded gains, with Egypt becoming the highlight of the Middle East, with an annual gain on 35% in terms of gold demand, though the WGC notes its market has not yet recovered from pre-2011 figures.
Russia’s gold jewellery market expanded by 7% to 81.9 tonnes, heralding a return to levels predating the global financial crisis. The relative health of the domestic economy has insulated Russian consumers in recent years, further evidenced by a 13% increase in the value of annual demand, over a period in which average annual prices rose by 6%.
Europe’s demand for gold as investment fell in 2012, with its share of global bar and coin demand slipping 22% from 25% the previous year. However, 2011 had been a record year, coinciding with the height of the sovereign debt crisis, with demand far in excess of anything previous seen in the region.