Jeweller - December 2021

TRADE ANALYSIS | Golden Connections
Million Oz
Gold Price Percent Change
CHART E: 40 YEARS OF GOLD JEWELLERY DEMAND & PRICES PROJECTED THROUGH 2020
120
Source: CPM Gold Yearbook 2021
110
120%
110%
100
100%
Gold Jewellery Demand
90
90%
80
70
60
50
40
30
20
10
0
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10
-10%
Gold Price (Right Scale)
-20
-20%
-30
-30%
YEAR 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19
Palloys
in the jewellery prices and partly because of the
perception that higher gold prices ‘no doubt’ are
increasing jewellery prices.”
Christian’s experience in the industry is long,
and in fact in an open letter to mining company
executives dated January 2001, he indicated that
gold jewellery production has little or no effect on
the price of gold: “Over the past few months CPM
Group has been asked by executives at several
gold mining companies that are clients of ours
about the price implications of rising jewellery
and/or investment demand for gold. Gold prices
never will rise significantly due to growth in
jewellery demand,” he wrote 20 years ago.
In 2000, and when the gold price were at a low of
$US271 per ounce, the head of a bullion trading
company commissioned an advertising agency
to create a ‘pitch’ to the gold mining industry
for a consumer advertising and marketing
campaign to promote gold jewellery, in a similar
way that De Beers once ran generic campaigns
promoting diamond jewellery to consumers.
Following lengthy research, Christian advised
the gold miners: “As it has been explained to
us by several gold producers, the gold mining
industry is being asked to spend large amounts
of scarce financial resources to promote gold
use in jewellery. The marketing people behind
this promotional effort are said to have been
producers that only by stimulating gold jewellery
demand can producers ever hope to see gold
prices rise.
“While it is a noble and worthy effort for
producers to promote gold jewellery, mining
industry executives must understand that it
is impossible to drive gold prices significantly
higher on a sustained basis with jewellery
demand.”
It should be remembered that his comments
are coming from the ‘other side of the fence’.
That is, how gold jewellery production affects the
price of gold bullion rather than how the price of
gold bullion affects the pricing of gold jewellery
manufacture, which then affects jewellery
retailers, especially small independent stores.
November, May and April
2020 resulted in large
gold jewellery sales; 4,914,
4,521 and 4,262 units sold
respectively. It should be
noted that many Australian
capital cities were in
lockdown during these
months and, despite this,
Australian consumers
continued to purchase gold
jewellery."
Christian told Jeweller: There are four broad
issues that affect the volume of gold used in
jewellery design and manufacture, as well as
consumer demand for gold jewellery:
• Gold and jewellery prices
• Income levels, disposable income, senses of
economic well-being
• Fashion trends
• Advertising
“In the end the mining companies rejected the
proposed consumer advertising program.”
Think globally act locally
One of the important lessons from the pandemic
is the fragility of globalisation; supply chains and
channels fell apart. Suddenly buying local became
not only paramount but also the only option.
James Bishop, operations manager Morris and
Watson, one of Australia’s largest chain jewellery
manufacturers and refiners, says, “The pandemic
has impacted a number of industries over the
last two years so it is difficult to narrow down a
particular trend specific to the jewellery industry.
While the price per gram for gold has increased
this has not had a negative impact on sales.
“Jewellers appear to be very busy despite the
interruptions due to the pandemic, this is
possibly a result of national and international
travel restrictions ensuring people spend their
money locally.” He believes that COVID-19 has
focused many retail businesses on local supply.
“More jewellers and retailers of all sizes are
also looking to purchase from local suppliers
due to national and international supply chain
disruptions and a customer base that is
becoming more socially and environmentally
focused,” Bishop says.
Jacinta Collins, general manager Golden Mile
Jewellery Manufacturers, says that “definitely,
when the price of gold jumps up, traditionally
it always meant that retailers held off on
re-ordering stock, in the hope that the price
would drop down again. When the gold price
didn’t drop down but instead continued to climb
further, we found that retailers realised that they
better hurry up and re-order.” “If retailers left it
too late, then they’d find that they weren’t able
to replenish their stock to the same level as the
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