MARKET COMMENTARY – Soaring gold prices seen limiting demand for jewellery; banking crisis, inflation boost allure of rare jewels and gems

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By David Brough

ISTANBUL, Turkey – Surging gold prices will likely limit demand for gold jewellery in a turbulent global economic climate, while the banking crisis and inflation will boost the investment allure of rare jewels and gemstones, Turkish exporters said at the March 16-19 Istanbul Jewelry Show.

They said a stable gold price would be the ideal scenario for their businesses, but the banking crisis, and the possibility that the U.S. Federal Reserve may slow down the pace of interest rate rises, could push gold prices higher.

With the return of jewellery shows such as Hong Kong this year, the availability of gold jewellery collections offered in the global marketplace has risen.

In the past week gold prices saw their biggest weekly increase since March 2020, up 5.6 percent, rising to USD $1,971.95 per ounce on March 17, as investors piled in to the “safe haven” yellow metal. Gold prices are currently near their highest level since April 2022.

“Jewellery buyers are looking for stability,” said Murad Kosker, owner of Murad Jewellery, a Turkish exporter of gold and diamond jewellery, noting that the recent rally in gold prices compounded a challenging outlook.

While rising gold prices sting the gold jewellery market, investors may seek gold bullion, say in bars, as a haven against instability in alternative assets.

“Some buyers have lost faith in financial markets – and the oldest mentality is to buy gold,” Murad Kosker said, in a reference to demand for gold bullion in the face of falling stock markets, property markets hit by rising interest rates, and the erosion of the value of cash held in bank accounts due to inflation.

Some Turkish gold jewellery manufacturers could reduce the purity of gold in their jewellery production, say switching from 18- to 9- or 10-carat gold jewellery if gold prices power higher, said Ceyhan Hosgor of diamond jewellery exporter Hosgor.

Many middle-income jewellery buyers have been squeezed by a cost of living crisis following the pandemic.

MARKET COMMENTARY –  Soaring gold prices seen limiting demand for jewellery; banking crisis, inflation boost allure of rare jewels and gems
Istanbul Jewelry Show

While exhibitor numbers were up at the present edition of the Istanbul Jewelry Show, trade sources said privately that visitor numbers may fall compared to the previous edition as Ramadan starts very soon, on March 23. Middle Eastern buyers are an important segment of visitors to the Istanbul Jewelry Show.

The show is prioritising attracting visitors from regions such as the Middle East, Latin America and Eastern Europe, said Murad Kosker, a board member of Turkey’s Jewellery Exporters’ Association (JTR).

Rare high jewellery pieces, featuring exceptional fancy colour diamonds or remarkable coloured gemstones, are becoming increasingly sought-after as investments in the mindsets of retail customers, due to worries over the safety of banking, and high inflation in many parts of the world, exhibitors said.

Demand for rare and beautiful jewellery and gemstones was resilient during the lockdowns, as many people benefited from government financial support and were limited in the ways in which they could spend their money.

Now, during inflationary times, rare jewellery items can be seen seen as safe havens when compared to risky alternative asset classes.

“When something is rare, people perceive that it will become an investment,” Ceyhan Hosgor said.

MARKET COMMENTARY –  Soaring gold prices seen limiting demand for jewellery; banking crisis, inflation boost allure of rare jewels and gems

Istanbul Jewelry Show