Rise in gold price not beneficial for Chinese jewellers?

The price of gold has already risen almost 24% since the beginning of this year, but not everyone in the gold sector is benefiting from this. The South China Morning Post writes that jewellers in China have seen their sales drop by 20 to 40 percent, as consumers have become hesitant to take a wait-and-see approach due to the rapid rise in the price of the precious metal. Buy gold. Due to the higher price, more people are returning their gold to the jewellers.

The demand for investment gold has risen sharply in Western countries, but price-conscious consumers in China and India currently prefer to keep their hands on the purse strings. In China, the gold price is currently even 30% higher than at the beginning of this year, due to the depreciation of the yuan against the dollar. In China and in Hong Kong, many jewels are bought at a very low premium compared to the Gold price. As a result, the prices of jewellery have risen sharply in recent months.

Decline in retail sales

"To the surprise of many, retail sales have fallen this year. Sales of gold jewellery have fallen by 20 to 40 percent this year and there was little improvement in June either.", GF Securities market analyst Hong Tao told the South China Morning Post.

The Australian research firm Macquarie came to the same conclusion after a survey of five major jewellery chains in China. They cited the particularly rapid rise in the price of gold, which gave consumers little time to react. It was expected that jewellers would benefit from higher margins, but in practice it turned out that many customers were deterred by the sudden rise in the price of gold.

Slowdown in China's growth

The decline in turnover at jewellers cannot only be explained by the increase in the price of yellow metal. Due to the slowdown in the growth of the Chinese economy, rising housing costs and the decline in the stock market, Chinese people simply have less budget to buy gold. Many consumers are still waiting to see how prices will develop in the coming weeks.

Shares of major jewelry chains in China are up between 8 and 22 percent, but analysts at Macquarie say investors have been too premature:

"Investors thought that jewellers would benefit greatly from the rally in gold, but that is a bit disappointing at the moment. We therefore remain cautious about this sector. We are positive about the gold price, but it is a misconception that jewellers' share prices are a reflection of the gold price."

Rise in gold price not a blessing for jewellers in China