Global gold demand hit £129bn last year but is the UK still buying?
Worldwide gold demand hit a record high last year, surpassing £129 billion in terms of value for the first time in 14 years. But are consumers still buying in the UK? Kathryn Bishop finds out about the evolving market and wisening consumer.
The past year has perhaps been characterised by talk of the demise of gold jewellery as escalating prices pushed it out of most budgets and silver quickly adopted a luxury mantle to take its place, but the annual gold demand report for 2011 from the World Gold Council (WGC) paints a rather sunnier picture for gold than might be expected.
The WGC’s report was released in February and revealed that gold demand in 2011 was the highest it has been – in weight, not just price – for more than 15 years. In terms of tonnage, demand for gold rose to 4,067.1 tonnes, worth in the region of US$205.5 billion (£129.6bn), which is the highest tonnage level since 1997. It is also the first time that demand has ever exceeded the US$200 billion (£126.1bn) mark.
By and large, the majority of this demand is for non-jewellery uses such as industrial purposes and investment buying, however the jewellery market was responsible for more than 500 tonnes of the demand and hit a new annual record in terms of value, totalling US$99.2 billion (£66.29bn). The fact that the value hit new highs won’t come as a surprise to many, thanks to the extraordinary prices hit during the year, and the report does go on to say that demand for gold jewellery fell 3%.
Similarly, gold hallmarking in the UK fell each month in 2011, with a total of 4.4 million gold items hallmarked in the UK last year — a fall of 1.4 million articles compared to 2010. 18ct gold hallmarking fell 13.2%, while 22ct gold fell by 4.7%.
This axis of falling demand but escalating value is a story that is playing out across the jewellery market in the UK. While the high street jewellers might be struggling to shift high volumes of standard 9ct stock, at the luxury end of the market there are still players on the sides of demand and supply and while the number of items sold might be dipping the value and weight of those pieces is on the rise.
Rachel Sweeney, co-owner of London jewellery retailer Cox & Power, says that gold jewellery demand in store has been steady. The company offers a bespoke service but also makes its own collections, including its London Forged line, which has become a popular choice for gold wedding bands.
“All the bands have that more tactile feel – for us it’s about the metal being precious so high carat gold is of interest to us,” says Sweeney. “We also have a couple of 22ct gold pieces by guest designers that are quite chunky.”
While Sweeney recognises that the market is difficult at present, she says that this hasn’t discouraged shoppers; instead they often take time to consider their options before making their eventual purchase. “Customers today are better educated and they understand that the value lies in the metal now. They used to think it was the stones that upped the price but they now know the value of gold and they realise why there are higher prices.”
However, Sweeney says that the rising gold price — it peaked in September last year at US$1,895 (£1,198) per ounce — has not discouraged how Cox & Power designs. “I don’t think we’re taking a more conventional approach to our jewellery making just because of the gold price,” she says. “Of course we are aware that we have to work with some constraints but price is not leading what we do and don’t make.”
Conversely designer Sarah Bond, who works under the brand name Saretta, says that the gold price has caused her to work more in 9ct gold and gold vermeil. She still strives to include 18ct gold designs in her mainline collections, however, and at present about 60% of her commissions are in 18ct. “I would be lying if I said Saretta had not been affected; I question whether any jeweller hasn’t [but] I do a lot of up-cycling of vintage pieces,” she says.
In Europe, brands known for their use of yellow gold continue to work predominantly in the metal, although there are some have that have become more innovative and creative in order to offer customers a point of difference.
German jewellery brand Niessing has begun to work with gold in more interesting ways. Its recent collection called Aura features an in-house manufactured gold that fades from white into rose gold; something it has promoted in recent months with the launch of necklaces and a collar featuring solid balls of the Aura metal.
Niessing’s tension rings, for which it is well regarded and sells in the UK, are also made from one solid cast piece of gold with no solder join, and the use of gold is never frugal — though this is, in part, due to the strength needed to hold the diamond in the tension setting.
Italy is well known for its gold jewellery and brands such as Pomellato, Al Coro and Vendorafa are becoming recognisable gold brands here in the UK.
One particular Italian brand, Fope, has emerged as a beacon of success for Italian jewellery design and in recent years sales of the brand’s flexible gold jewellery have gone from strength to strength. David Coupland, managing director of Saunders, Shepherd & Co., Fope’s distributor in the UK and Ireland, says Fope has been “extremely successful”. At present it is stocked in about 120 high-end independent jewellery retailers including Hamilton & Inches, Mallorys of Bath, Pragnells and Rudell the Jewellers.
“In 2010 the brand grew by 30%,” says Coupland. “In 2011 it grew by a further 12%.” The figures show that Fope has caught the imagination of the British consumer in spite of escalating gold prices that have caused other gold jewellery brands and products to suffer. Fope’s bestselling pieces, such as its flexible 18ct yellow gold Eka bracelet, have seemingly become modern classics that are easily marketed to any age group, according to Coupland.
With a focus on UK designers, Malcolm Betts has been working in 22ct gold for many years and feels customer demand for gold jewellery is stable. However he has had two hurdles to face over the past 12 months: successfully upping his prices and finding ways of making his use of gold go further without compromising on the design and depth of his creations.
“I strive to use higher carat gold where I can and have been working to make the maximum use of the gold through chunky chains or hammered-out bangles,” explains Betts.
Betts says his London customers continue to buy heavier pieces in 18ct gold, though his name has become synonymous with 22ct gold, a metal he says he adores for its malleability and the fact that he can melt it down and work with it in-house, recycling any scrap as he goes. Like Bond, he is also regularly working with customers’ own jewellery, melting and remodelling old gold jewellery that is sometimes 200 years old, keeping the history but creating something new and in his signature style. “I’m innovating all the time with gold,” explains Betts. “I can do what I like with it and don’t have to follow trends.”
Ute Decker flies the flag for the Fairtrade Fairmined jewellery designers. Her experience of working with gold somewhat mirrors that of Betts. “I love the story of the gold and I’m keen to tell my clients about [Colombian ethical gold initiative] Oro Verde, because today it’s a rarity to know the provenance of anything, whether jewellery or not,” Decker explains. Her love of gold means that Decker continues to produce one-off items in the metal, either as a bespoke creation or to sell as part of her mainline collections. At present Decker’s work in 18ct Fairtrade Fairmined gold retails upwards of £1,900.
But it’s not just established brands and designers who are working to win a slice of the gold jewellery market in the UK. Portuguese jewellery brand Eleuterio showcased its designs at The Jewellery Show at Spring Fair in February, with a view to pushing into the UK market with intricate gold jewellery designs and not a single token wedding or engagement ring in sight.
Karolina Schienke, Eleuterio’s UK brand representative, says that rather than downscale its designs to sell more jewellery by volume it consciously works to maintain a certain standard of quality and instead the family-founded brand looks for new markets and new clients to win custom.
“Eleuterio’s pieces are not aimed at clients who buy from the point of view of a product’s price,” says Schienke. “The high gold standard [we use] of 800 parts, which equals 19.2ct, means that the jewellery, apart from its timeless design, is also a safe capital investment.”
The brand’s designs have an ancient feel, utilising methods such as filigree and combining them with oriental, Indian and Egyptian styling that is both traditional and timeless.
“We are aware that we are a niche producer,” explains Schienke. “We prefer slower and more sustainable growth.” As a result, Eleuterio has made the most of the world’s changeable financial landscape and, rather than avoiding lesser-known markets, has instead moved into such countries. Its most recent success, for example, has been the southern African country of Angola, where its sell-through has been described as strong. Why try to move into the UK, then? Schienke says it is because demand is still apparent here for gold jewellery. “The UK is a great market and we believe that, in spite of economic conditions, it will always stay hungry for high end quality products.”
In what may come as a welcome turn of events for jewellers, the gold price appears to be relaxing somewhat. In recent weeks the it has fallen from more than £1,130 per ounce in late February to £1,043 per ounce as Professional Jeweller went to press in late March. It was also the first time in some months that the gold price had fallen below that of platinum — typically a more expensive metal per ounce — having surpassed its price per ounce some six months ago.
Arguably, though, despite the price fluctuations there is still a market for gold, even if consumers are more considered in their purchases and designers a little more careful with how they use and work with the metal. And with the value of gold now better understood by consumers — thanks in part, perhaps, to the widespread nature of cash for gold schemes — shoppers are now more educated than ever, purchasing gold safe in the knowledge that their money is an investment for the rest of their lifetime — and probably beyond.
This article was taken from the April 2012 issue of Professional Jeweller magazine. To view a digital version of this issue online click here.