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Sales of gold jewelry in China are set to plummet this year as the economic damage from the deadly coronavirus crisis widens.
The death toll from the outbreak has topped 1,000 and shoppers are staying away from public places to avoid infection, while also limiting their spending to basic necessities such as groceries. Jewelry retailers such as Luk Fook Holdings International Ltd. are shortening business hours and managing time off for employees in an effort to prevent the disease from spreading.
Metals Focus, a London-based research firm, sees a 6% drop in sales in China this year, extending an estimated 7% drop in 2019 to a seven-year low
“People are not in the mood to shop for jewelry,” said Zhang Yongtao, chief executive officer of the China Gold Association. “Stores and shopping malls are closed because of the virus,” he said, adding that sales of gold jewelry and bars will drop substantially this year.
Metals Focus, a London-based research firm, sees a 6% drop in sales in China this year, extending an estimated 7% drop in 2019 to a seven-year low. It said the decline could turn out to be “particularly acute” given the Lunar New Year has traditionally been the busiest period.
The crisis comes at a time when physical demand is already suffering in China and India, the world’s largest gold consumers, due to rising prices and slower economic growth.
Retailers are already reeling from the long-running, pro-democracy protests in Hong Kong — and Luk Fook saw a significant drop in store sales and daily retail traffic across mainland China, Hong Kong and Macau during the Lunar New Year, according to Deputy Chief Executive Officer Nancy Wong. The company has implemented some staff-cost saving measures and launched Valentine’s Day promotions to cushion the impact of the virus.
Bullion is trading near the highest level since 2013 on lower interest rates, and as geopolitical tensions and the virus outbreak sent investors in search of haven assets. If the spread of the disease continues to accelerate or develops into a pandemic, prolonged weakness in the Chinese economy and its impact on global markets should provide a strong boost to gold, Metals Focus said last week.
Hong Kong retailers could see their profit from the city drop in 2020 amid the outbreak, according to Bloomberg Intelligence. Chow Tai Fook Jewellery Group Ltd., the world’s second-biggest jewelry chain by market value after Tiffany & Co., plans to shut about 15 of its stores in Hong Kong after net income fell following the demonstrations that drove tourists away.
Jewelry makers are also feeling the pain. The Hong Kong Jewelry Manufacturers’ Association has flagged that operating efficiency at Chinese factories might only be at about 20% to 30% as some workers might still stay at home, and expressed concerns that orders from retailers on the mainland may drop. Retailers’ sales volumes of gold jewelry may plunge 70% in the first quarter, from the same period a year ago, said Chairman Benny Do.
“In my 40 years in the jewelry industry, I have never seen the entire Chinese market ground to a halt like now,” said Do.
(By Annie Lee, Ranjeetha Pakiam and Jinshan Hong, with assistance from Daniela Wei)
Comments
Sami
Very informative