But even as China’s consumer diamond market, the world’s second largest, is losing its luster, the country’s appetite for gold remains insatiable. The difference in trends can be seen as a response to the country’s economic problems. Analysts say that in times of uncertainty and shrinking wallets, people are turning to gold as a haven to store their wealth and refraining from making discretionary purchases such as diamonds. .
“Chinese consumers are looking for ways to protect their wealth as confidence weakens,” said Gary Ng, senior economist at French bank Natixis. “Gold has a dual purpose: consumption and investment, and it offers greater resale liquidity and price transparency than diamonds.”
It’s understandable why gold is favored by Chinese consumers these days
Buoyed by years of rapid economic growth, mainland China accounted for just 1.5% of the global diamond jewelry market in 2000, but grew by 2014, according to a report released in August by diamond giant De Beers. In 2017, it grew to 13.4%. After that boom, this rate remained relatively flat until 2019. By the end of the pandemic in 2022, China’s global share had fallen to 10.2%.
From 2021 to 2022, diamond sales in China fell by 11.2%, the largest decline of all major global markets surveyed by De Beers.
The highly unusual fluctuations in global demand for diamonds over the past four years may have affected consumer sentiment toward diamonds, “especially compared to gold, which is much less volatile,” says the New York-based Independent. said Paul Zimnisky, a diamond analyst.
He agreed that China is underperforming other major markets. According to his estimates, the diamond market, made up of mainland China, Hong Kong, Macau and Taiwan, has declined from US$13.7 billion in 2021 to US$12.8 billion in 2023.
“Given the current level of economic uncertainty, it is understandable why gold has been favored by Chinese consumers recently,” Zimnisky said.
Lai Ming Yii, research manager at Daxue Consulting in Shanghai, said lab-grown diamonds are also eating into the market share of mined diamonds.
“This affordability is particularly appealing to younger consumers who are price-sensitive but seek quality and a symbol of status,” she says, adding that newlyweds are also opting for a high-investment diamond engagement ring alternative. He added that there is.
In contrast, gold appeals to cautious investors as a “safe-haven asset amid economic instability and geopolitical tensions,” and consumers are also attracted to frequent gold offers at prominent jewelry stores. You can be tempted, Lai added.
Chinese consumers bought 308.9 tons of precious metals in the first quarter of this year, according to data released by the China Gold Association last month. This is an increase of 5.9% compared to the same period in 2023. As of Friday, the price of gold was US$2,377 per ounce, according to the London-based World Gold Council.
Central banks around the world, including China, are also increasing their gold holdings to hedge against geopolitical risks and market fluctuations, Natixis’ Ng said, adding that he expects this trend to continue.
The People’s Bank of China continued its buying spree in April, with the country’s official gold reserves increasing for the 18th consecutive month. According to the World Gold Council, its holdings have increased by 16% in the past year and a half alone to 2,264 tonnes.
This disconnect is also being felt in retail jewelry stores, where gold supplements the overwhelming sales of diamonds.
At Luk Fuk, which is headquartered in Hong Kong and has a strong presence on the mainland, its wholesale business revenue decreased 21.4% year-on-year in 2023, mainly driven by diamond sales. The company said in its annual report earlier this year that it would “aggressively promote” fixed-price gold products to make up for the shortfall.
It’s a similar story at Zhousang Sun, where the company said in its annual report that sales of diamond jewelry, especially in the high-priced range, “are on a declining trend in mainland China,” but same-store sales in mainland China growth increased by 21%. 2023 against the backdrop of gold demand.
Other companies weren’t so lucky. Chinese diamond ring brand “I Do” filed for bankruptcy reorganization in January 2023, and Shenzhen-listed DR Corporation, which owns the “Darry Ring” brand, saw a sharp decline in profits in the first half of last year.
A diamond salesman who only joined the industry two years ago told state-run Phoenix Media that his team used to earn about 1 million yuan (approximately US$138,000) a year from sales. He says he receives about 150 inquiries and about 20 to 30 orders a month. . By mid-2023, inquiries had plummeted to 20 to 30 per month, and orders only came in occasionally.
But some are still betting that diamonds might last forever.
US diamond specialist Harry Winston opened its eighth Chinese store in Hangzhou in February, while De Beers has announced that it will continue to attract China’s ultra-rich customers despite acknowledging China’s difficult macroeconomic environment. The report claimed there was an “encouraging outlook for diamond jewelery sales” due to strong demand from China. The same goes for untapped markets in lower-tier cities.
China’s luxury jewelry sales will grow 17% year-on-year in 2023, according to an April report from PwC China, with professional services firms identifying several “high-potential” segments in the personal luxury goods market. It has been identified as one of the
“I think China [and] “India remains the most exciting market for the diamond and jewelry industry,” Zimnisky said, citing India’s huge population and rapidly growing middle class.
“Jewelry demand is highly correlated to the health of the economy,” he added. “So, of course there will be ups and downs, but the overall long-term trend remains positive.”
