Gold Jewellery Demand and Gold Price Volatility: A Global Perspective

Profound changes have occurred in the gold jewellery market which has experienced a secular decline in demand over the last twenty years. Despite the apparent growth in gold jewellery demand in India and China in the previous two decades, there has been a more than a compensatory decline in demand for gold jewellery in the rest of the world. This indicates that the industrial uses of gold have been in decline with other traditional uses, such as, dentistry declining even more rapidly than that of jewellery. As a result, the investment of gold in the form of gold bars, coins and Exchange-Traded Funds (ETFs) have had to absorb the increased supply that resulted from the price boom of 2011-2012. The paper argues that the demise of gold jewellery demand along with other traditional uses has resulted in a significant increase in the long-term gold price volatility.