Global jewellery industry calls for immediate action on gender equality

The global jewellery industry has called for collective and immediate action on gender equality, a crucial building block in developing a strong and responsible supply chain that contributes to achieving UN Sustainable Development Goal 5.

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Dubai IE promotes Gold & Jewellery sector in JCK Las Vegas

Dubai Industries & Exports (Dubai IE), the export promotion and industrial development agency of Dubai Economy, showcased the capabilities and potential of the gold & jewellery sector in Dubai for the first time at JCK that concluded in Las Vegas...

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US Holiday jewelry sales expected to skyrocket

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Australia becomes world’s biggest producer of gold for first time

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Nigerian minister mulls death penalty for gold smuggling – report

Nigeria’s deputy minister in charge of mines and steel development has called for the death penalty for gold smuggling in the West African country.

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Prices for diamond jewelry in 2009

25 february 2009

As Zale prepares to report the worst holiday profits in the company's history, it becomes clear that mid-market jewelers must reinvent their profit model in order to survive, says Nicholas White, President of White & Co. in his analysis posted on the GLG portal.

According to a few analysts, fine jewelry will likely decline in 2009.   But deflation is far from a certainty.  For instance, gold prices are increasing and the macroeconomics favors higher gold prices in 2009, not lower.  Cumulatively for 2009 the average price is $893 according Kitco.  That’s 11.1% higher than the average gold price during the last four months of 2008.  Presently gold is trending higher.  As of 02/23/09, gold closed at $985.65 according to the 2nd London fix.  That’s a whopping 22.5% increase over the average since September 08.  Still the jewelry PPI only increased 0.3% in January 09.

The reason the PPI was so low was because jewelry manufacturer’s shipped very little inventory in January as jewelers tried to sell down millions of dollars in stock carried over from the dismal 2008 holiday season.  That trend is likely to continue through out the spring at least until the 3rd quarter when retailers will likely place orders for holiday sales.  In the interim, actual selling prices will likely decline as excess inventory is sold off and closing store inventories are liquidated which will set consumer value expectations for fall.  That’s the paradox jewelry retailers currently face, lower actual selling prices in combination with higher product prices in the 4th quarter.

However, gold isn’t the only consideration in the price equation.  Diamond prices are also in flux. Rough diamond prices all but collapsed just prior to 2008 years end.  Since then both private and government mine owners have limited production to stabilize the market.  Still there is an abundant supply of polished goods in the pipeline, meaning there are some good deals to be had for diamond buyers compared to last years polished diamond price levels.

That begs the question, is 2008 base pricing sustainable as new rough enters the system? The answer is probably yes if you believe independent producers and government run mine owners will continue to limit production.  However, with demand declining it’s problematic whether governments which depend on rough diamond sales for much of their country’s GDP will abide by any voluntary quota agreement.  In other word, polished diamond prices could decline significantly in 2009 and that could be good news for some jewelry retailers, well maybe.

I say maybe because there is some evidence that lower jewelry prices aren’t rekindling demand for jewelry.  Clearly much lower selling prices after Christmas didn’t materially increase demand.  So, with the exception of the Uber-rich part of the market that will likely snap up large diamonds as prices decline, guild and mid-market jewelers might not benefit from lower prices.  On the contrary, lower diamond prices could mean lower sales and profits too if unit sales don’t increase simultaneously.

Putting it all together, what does higher gold prices and lower diamond prices mean to retailers?  Well, high end retailers will likely benefit, in contrast to mid-market players.  This means luxury retailers like Tiffany, Cartier, and Bulgari could see sales turnaround in 4th quarter of 2009.  Blue Nile would likely benefit too.  On the other hand, mid-market jewelers like Zale Corporation and Signet Jewelers won’t benefit much.  At best, the change in gold and diamond prices could mean parity with 2008 price levels which won’t stimulate demand.  At worst, lower prices will mean lower sales which will drive absolute profits down as unit sales fail to reach the breakeven level.  If true, large and small mid market jewelers will have to completely rethink their businesses if they are to survive.  Whether there are 22,500 jewelry companies two years from now or half as many will depend on how and when the industry faces the problem.

Unfortunately, there isn't much leadership in the industry today. Small jewelers need a role model to change and manufacturers need a customer to make their change worthwhile.  That puts the responsibility in part on large players like Zale and Signet.  However, whether either company will step up to the challenge remains to be seen.