The gold market should see slower jewelry demand through end of 2022 amid deteriorating global economic growth, says World Gold Council

• Gold jewelry demand looks set to weaken for the rest of 2022, said the World Gold Council.
• A slowdown in the global economy is the largest risk to demand, said the 32-member group in its latest trends report.

Demand for gold jewelry will be sluggish in the second half of 2022, according to the World Gold Council, which pointed to hurdles in two of the biggest markets — China and India.

"The largest risk to jewellery comes from potentially weaker economic growth," the council said in a report published late Wednesday.

It sees "notable downside risk" in the gold jewelry market for the rest of this year. In April, the council projected flat demand in 2022.

The more downbeat view from the council, whose membership is comprised of 32 gold mining companies, arrived shortly before US government data Thursday suggested the world's largest economy has entered a technical recession. The International Monetary Fund also this week cut its 2022 global GDP growth projection to 3.2% from 3.6%.

Flash points in gold demand moving forward this year lie in China and India, the World Gold Council said.

"China's lockdowns have dented demand and a recovery will likely be slow due to the continued strict zero-COVID policy and stresses in the domestic real estate sector," it said.

China's gold jewelry demand dropped 29% in the second quarter to 103 tonnes. But some relief may be found in consumption stimulus measures and pent-up wedding demand, the council said.

The Chinese government on Thursday reportedly said it will work on landing the best possible result for economic growth in 2022, indicating leaders in the world's second-largest economy will miss a target of 5.5%. The economy expanded by a relatively slow rate of 2.5% in the first half of 2022.

And while gold demand in India climbed 49% to 140 tonnes last quarter on robust wedding and festival sales, the report noted headwinds there too.

In particular, pressure in India should stem from an increase in the country's gold import duty and the possibility of additional curbs on gold buying to stem further depreciation of India's currency, the rupee. India this month raised its gold import duty by 4.25% to 18.45%.

Overall jewelry consumption in the second quarter was 4% higher at 453 tonnes as growth in India and the Middle East outweighed declines in China and Russia, the group said.

Gold futures during Thursday's session rose by nearly 2% to $1,752 an ounce. Prices have declined by more than 4% so far this year.