Gold and Diamond Prices Dampen Jewelry Industry Growth

Send Date: 2012-02-22 20:24:09

Source: www.jewellerynetasia.com

Gold and Diamond Prices  Dampen Jewelry Industry Growth

The U.S. is going through a slow, steady recovery with jobless rates falling and retail sales climbing toward the end of the last year and the beginning of this year. For the jewellery industry, 2011 was one of the strongest years in some time. Jewellery and watch sales totalled a record $68.3 billion in 2011, a gain of 11 percent over 2010, according to U.S. government data. But all of this momentum could be lost because of the rising price of gold and diamonds.

Gold jewellery has been one of the most difficult issues for the jewellery industry since the economic recession in 2008. Investors continue to buy the precious metal as a hedge for economic instability while retail jewellers as well as designers and manufacturers continue to adjust to the price increases. Demand for the precious metal is being fuelled by China and India, who now account for 55 percent of global gold jewellery demand and 49 percent of overall global gold demand, according to the World Gold Council.
Fourth quarter gold jewellery demand was down 9 percent to 42.7 tons while full-year demand fell by 11 percent to 115.1 tons, the WGC said. By value, gold jewellery rose 12 percent for the quarter to $2.3 billion and 15 percent for the year to $5.8 billion.

However, I just attended two trade shows for independent designers (the Buyers Market of American Craft and the more intimate globalDESIGN). Several designers said they have been working with less expensive materials, such as silver and 14k gold, but found that their clients still gravitate toward their 18k and higher-karat gold jewellery .

But this isn’t true for independent jewellery retailers who say jewellery sales are slowing, even luxury sales, because of the rising price in gold. Retailers have been buying gold for years and are becoming more creative in figuring out ways to deal with the high price and soft demand for the precious metal. A few jewellers are accepting gold as payment instead of credit cards for services they provide.

Diamond prices are increasing due to supplies not being able to meet the demand, led again by China and India.

Overall, net polished diamond imports by the U.S. in 2011 declined 8.9 percent to $3.91 billion, according to the U.S. Department of Commerce.

The economics are enough for De Beers to urge caution for 2012 diamond sales even though sales increased by 27 percent in 2011.

Blue Nile, the largest online diamond and jewellery retailer isn’t even immune from the uptick in diamond price tick. In fact it may be even more vulnerable since price and value are among its main selling points. Its sales decreased in 2011 by 2.1 percent to $112.3 million. The company largely blamed “commodity costs” for its first down year in some time.

So be prepared for another year of uncertainty.