By and large, the April collapse in gold prices, the largest in 33 years, gave a chance to revive demand and increase sales to the jewelry industry the world over. When gold fell by more than $ 100 in one day and stopped below $ 1,400 per ounce on April 14, jewelry markets in various countries responded in different ways.
According to the China Daily, “while gold markets in the United States and Europe saw panic selling, sales of gold bars and jewelry jumped in China as buyers viewed the lower prices as an opportune moment to invest.”
"The culture in Asia is such that they will absorb the physical metal when the price drops," Dick Poon, general manager at refiner and trader Heraeus Metals Hong Kong Ltd., said in a telephone interview.
For example, some investor in Guangzhou in southern China spent 6 million yuan (about $ 1 million) to buy 20 kg of gold bullion.
Shanghai-based Laofengxiang Jewelry announced it had immediately adjusted the retail price for 999-fine (24-carat) gold by more than $ 1 per gram, while another large Chinese jeweler, Chow Sang Sang has gone even further cutting prices for triple-nine gold by 30 yuan (about $5) just in the course of one day. Many buyers took advantage of these offers snapping up gold bars, as well as bracelets, earrings and rings at a discount.
There was a pandemonium of buyers at jewelry stores in Mumbai's Zaveri Bazar. Local retailers said they decided to extend their hours until midnight on Thursday, April 18, when gold was 12% cheaper compared to the previous week.
The greatest shopping spree was recorded in India and China, the largest consumers of gold in the world, where the population traditionally buys the precious metal for brides and children, as well as for vaults.
This year's 18-percent decline may reignite demand that last year fell for the first time in three years, according to Bloomberg.
Jewelry prices respond more quickly to fluctuations in the value of gold in such countries as India and Singapore, where, in contrast to the United States, jewelry stores publish daily gold prices (in the same way as banks release exchange rates) and vary their price tags accordingly. That is largely because demand is stronger, said Jessica Fung commodity analyst at BMO Capital Markets. India accounts for 27% of global demand for gold jewelry, while China another 26% and the United States, by comparison, for just 5%, she added.
The United States has another rule - any fall in gold prices does not mean rapid decline in prices for gold jewelry. American jewelers create a more tangible added value through craftsmanship, design, branding and quality of customer service, which are part of the price. Therefore, a gold jewelry piece hitting the shelves of jewelry stores in the United States is not only gold as a basic element, but also all of the above, multiplied by the cost of raw materials.
Of course, all the rules have their exceptions and there are stores in the United States selling gold jewelry by weight. Here is a recent dialogue in one of the small local jewelry stores in San Diego:
- How much is this ring?
- Now let’s weigh it and count at the current rate of gold.
- Are you selling it by weight?
- How else it can be done you think?
Another exception is Blue Nile, a major online retailer of diamond rings, which did not hesitate to announce that it intends to reduce prices for its gold inventory to attract more customers. Chief Executive Harvey Kanter said in a phone interview with the Seattle Times that Blue Nile began lowering prices for gold jewelry by about 10 percent Tuesday. “The reality is we're going to do more business," Kanter said.
Still, most U.S. jewelers will not rush to cut prices and will take a wait and see mood. Not even lower-end jewelry will be getting discounted anytime soon. Many jewelers buy gold in advance, so they won't be affected by new prices for another few months, and they'll only feel it if their suppliers pass along the savings, says MarketWatch.
Most likely, the first to lose in price in the United States will be jewelry of classic or minimalist design - something that does not require long and laborious work from jewelers and is quickly sold in merchandise turnover.
The decline in gold prices, in particular for the U.S. market, is a very good opportunity to restore the jewelry industry. Jewelers in the United States were caught between two fires, one of which was lower purchasing power of the population on the backdrop of a poor economic situation and the other was higher gold prices which made gold jewelry less affordable to consumers. If lowered gold prices will stay for quite a long time, this will make gold jewelry more accessible and attract demand. Just the thing so needed by the jewelry industry.
Olga Patseva, Editor in Chief of the American Bureau, Rough & Polished
