Gold and jewellery segment in figures: September – October

Gold, following the tracks of oil, continues to set new price records on a background of the falling dollar, aggravated international situation and sluggish crisis in the credit market. In September, the gold price reached its record high value since 1980. It is obvious that this growth is largely spurred by using gold as a protective mechanism to offset market risks.
Last year, the world gold output went down to a ten-year minimum. This year, gold production has again been registered as decreasing in a number of countries. For example, in South Africa, the largest gold producer in the world, the mining output in January – June dropped by 7%. Earlier the Union of Gold Producers of Russia confirmed its forecast for the current year pointing to a drop in the gold output by 2 tons as compared with 147.619 tons in 2006. At the same time the jewellery industry increased its purchases in the first six months of this year by 23% - up to 1 288 tons – accounting for 62% of the total world demand. According to GMFS, in the second half of the year this indicator will go up by 6.3% against that of the year past and will reach 1 309 tons.
Experts point to the market volatility and give different outlooks for the yellow metal and for other precious metals as well.
The analysts from JPMorgan Chase & Со believe that gold prices may surge to $850 per troy ounce – a record level reached in January 1980. “At this stage we do not see any signs the dealings for a rise are going to abate,” they say in their review. “We believe that soon the psychological barrier of $800 per ounce will be overcome followed by $850.” Goldman Sachs believes that during the coming three months gold prices will reach $775 per ounce, then $800 per ounce in the course of six months and after that they will go down due to strengthening of the US dollar.
Credit Suisse has given a rising forecast for gold, silver and platinum group prices for the coming 12 months due to the decreased supply of these metals to the market and the weaker dollar. Credit Suisse believes that gold will be traded at $730-770 per troy ounce as compared with $670-720 per ounce expected before.
According to some forecasts, any further rise of gold prices may lead to closing one third of small jewellery stores in the USA. The crisis in the crediting market affects the luxury market as well. In August, according to the “Financial Times”, the price for expensive wines went down for the first time in this year. According to experts, the credit crisis may produce a negative impact on other de luxe wares, including jewels in the premium segment.
At the same time, the largest gold consuming market – Indian – is getting ever thirstier. According to experts, by the end of 2007 India may purchase about one thousand tons of the noble metal both in jewellery and in certified coins and ingots. Thus, says ITAR-TASS, the people of this country may break their record of the year past, which was equal to 715.5 tons.
Experts of the Russian banking business also point to the growing demand for gold, which is viewed as a good instrument of saving money by the local population. There is a demand for coins and gold ingots and for opening precious metal accounts. For its part, Sberbank is actively engaged in promoting such services for its corporate clients and individual persons.
According to analysts from the Russian Jewellery Network news agency, it is expected that in 2007 jewellery sales in Russia will grow by 20%.
960 companies are engaged in manufacturing jewels (their majority are privately owned). The number of sole proprietors engaged in this business is over 60 000, says the research prepared by the Russian Jewellery Network agency.
As estimated by analysts, the jewellery network in Russia taken totally is developing at a pace exceeding the GNP. According to the Guild of Russian Jewellers, in 2006, the retail sales grew by 25-30% reaching 80 billion roubles (or $3.6 billion) and diamond jewels accounted for one half of that amount – 44 billion roubles (about $1.8 billion). According to the Rosstat statistic agency, the jewellery production in Russia in 2006 reached 16.8 billion roubles (after taxes).
Experts point to a strong demand for jewels but warn that such a crowded market leads to a 5-7% profitability drop in this business every year, since the market capacity is not growing proportionally to the number of stores.
The inflation growth is an important element, which has its influence on the Russian jewellery market. Starting with milk, the price rise, though to a lesser extent, spread over almost all other commodities and services.
The September statistics look as follows. According to Rosstat, the jewellery prices in Russia went up by 1.4-2.6% on their average. However, the data received from Russian provinces varies:
in the Arkhangelsk Region the jewellery prices rose by 2.2%;
in the Krasnoyarsk Territory they went up approximately by 2%; and
in the Lipetsk Region – by 4-4.5%.