Australian jewellers are having to get used to a new daily routine: checking the wild gains in the price of gold. “I have to now,” said Timothy Sung, director of Melbourne’s Janai Jewellery.
If bombs have dropped somewhere, or US President Donald Trump has unleashed new chaos with threats of tariffs, the past year has shown that a jump in the price of gold will invariably follow. This could add hundreds or even thousands of dollars to the cost of an item of jewellery, pressuring retailers’ profit margins.
More so than ever before, anxious investors and central banks have been piling into gold, the yellow metal that has been prized by civilisations for thousands of years for its lustre but which is now more often favoured as a safe haven for storing wealth during uncertain times. In an era defined by geopolitical tensions, inflation fears, erratic policymaking and an erosion of trust in the US dollar, gold’s value ballooned 64 per cent last year, its biggest annual gain since 1979.
Predicting the next price shock had proven a “bit of a challenge” lately, said Sung, as he looped around the showroom of his store on Collins Street in Melbourne’s CBD. The latest jolt arrived earlier this week with fears Trump’s plan to take over Greenland could set off fresh diplomatic and trade crises, which spooked financial markets and boosted gold’s appeal. On Wednesday, it hit an all-time high above $US4800 ($7000) an ounce.
“As soon as I hear news, I have to be brave enough to buy gold,” said Sung, who sources gold from Australian producers, processes it at his factory in Vietnam and fabricates it into jewellery in Melbourne. He estimated that he spent tens of thousands of dollars each month last year to lock in supplies of the metal before prices marched even higher
Demand for jewellery had remained resilient, Sung said, especially for engagement rings. “Everyone still needs one – no ring, no wedding,” he said. Janai sells about 300 rings a month, forcing Sung to try to keep one step ahead of any major fluctuations.
But as rising costs have crunched retail margins and forced jewellers to reset prices, consumer preferences have also begun shifting in favour of pieces containing less gold. Jewellers report that more people are asking for nine carat or 14 carat, instead of 18 carat gold, or a different metal altogether, like platinum, which used to sell at a discount. Male wedding bands with widths of 5 millimetres or 4.5 millimetres, rather than 6 millimetres, have also gained popularity.
So steep were last year’s gold price rises that some heavier pieces of jewellery ended up being hundreds of dollars more expensive between the time of quoting and delivery, said Talitha Cummins, founder and director of The Cut Jewellery, which has two stores in Sydney and is launching its first in Melbourne next month.
“You have to keep a really close eye on the numbers and think ahead a little bit when you are quoting to try to anticipate where prices are going,” Cummins said.
“There is a perception that jewellers are making a lot of money out of these price rises, but that’s not the case unless you’ve got stock on hand that you’ve held for a long time.”
Naturally, higher prices had deterred people from buying as much gold as before, she said. Last Christmas, for example, fewer customers purchased gold chains with pendants than a year earlier. “Some people might opt just for a pendant to wear on their own chain now,” she said.
“People are becoming crafty and thinking a little differently.”
What the coming 12 months might hold for the gold price remains to be seen, but some money managers are already betting that private-sector investors won’t be selling their gold stocks anytime soon. They cite worries such as high debt levels in the US and Japan, tensions over Greenland and Trump’s escalating efforts to exert control over the US central bank.
“Nothing has changed. If anything, Trump has gone crazier than ever,” said AMP chief economist Shane Oliver. “This chips away at faith in the US, and the worries about the Federal Reserve are only ramping up. I think it will go on for a while yet.”
Further price rises would not be linear, Oliver said. “We will get pullbacks, as gold gets to the point that it is technically over-bought, and traders unwind their positions, but the trend will remain up,” he said. “That’s the nature of a bull market, and gold is in a clear bull market.”
Cummins was bracing for challenging times to continue. “I don’t see world peace or a global stabilisation happening anytime soon,” she said. “It’s not looking promising, but we will have to go with what is thrown at us.”
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