Gold Market Booms as Diamonds Lose Their Sparkle
Recently, the international gold price has experienced a significant increase, reigniting the “gold fever” and capturing attention worldwide. In Xicheng’s offline gold stores, the price of gold jewelry, including the processing fee, has surpassed 600 yuan per gram. Gold jewelry, which was once considered old-fashioned, is now highly sought after by young people. While gold continues to heat up, diamonds have experienced a cold spell. As of July 12, 2023, the global rough diamond price has dropped by 25% from its peak, resulting in a sharp decline in sales through retail channels.
Over the past 20 years, the price of gold has risen a staggering six times, leading to a resurgence in popularity of gold jewelry. Chen Wan, a jewelry industry practitioner, explains that gold possesses dual attributes as a commodity and a financial asset, with both physical consumer and investment markets maintaining high levels of enthusiasm. “Gold has a high value preservation and risk resistance, making it an attractive option for investment and financial management. If buying funds was popular in 2020, buying gold has become a financial trend since last year, with more and more young people jumping on board,” says Chen.
The demand for gold jewelry in the physical consumption market has surged, particularly among young people. The “2022 China Gold Jewelry Industry Insight Report” reveals that the proportion of young people purchasing gold has increased from 16% to 59% between 2016 and 2021, making them the top consumer group for gold jewelry. Online consumption of gold jewelry is expected to reach 27.9 billion yuan in 2023, representing a significant 51% year-on-year increase.
Consumers’ growing interest in gold jewelry has prompted jewelry brands to focus on its development. From style design to production technology, brands are constantly iterating and providing jewelry with higher durability and more diverse appearances to meet the demands of a diversified market. Mr. Lin, manager of the China Gold Store in Wanda Plaza, Liangxi District, affirms the transformation of gold jewelry, stating, “In the past, gold jewelry was often seen as ‘rustic.’ However, with innovative craftsmanship and cutting-edge design, gold jewelry has gained new vitality.”
While the gold market thrives, the diamond market remains stagnant. The global rough diamond price index shows a continuous rise up until March 2022 when it reached a historical high of 158.39. Since then, prices have steadily declined, falling by 25% from their peak as of July 12, 2023.
Data from the consumer market further reflects the diamond market’s downturn. In the first half of 2023, sales of diamond jewelry dropped by 9.7% compared to the same period last year, surpassing the 5.9% decline in sales of all categories of jewelry. “In the past year, the sales volume of natural diamond jewelry has reduced by nearly half,” reveals Qian Weibin, president of the Wuxi Gold, Silver, Jewelry, and Jade Industry Association. Due to changes in consumer attitudes and preferences, the market for natural diamonds has shrunk. Qian explains that the allure of cultivated diamonds lies in their lower prices compared to natural ones. Additionally, people no longer attribute the symbolic meaning to diamonds as they once did, and young consumers find alternative ways to express and prove their feelings. Furthermore, the high brand premiums associated with diamond jewelry have led to decreasing consumer willingness to pay for the brand.
Consumers are also recognizing the difference in value retention between diamonds and gold. Ms. Wu, a citizen, notes that a diamond ring she purchased for over 200,000 yuan in 2019 was only offered half of its purchase price at a recycling shop. “If I had used the money spent on diamonds to buy gold, not only could I have recovered the original investment, but I could have earned a considerable profit,” says Ms. Wu.
Despite the fluctuating prices of diamonds and gold, Qian Weibin believes that consumption motivation is the main driving factor. He explains, “If people value gold’s safe-haven function, buying gold bars is a better option than purchasing gold jewelry. For most consumers, whether buying gold or diamond jewelry, their primary concern is its wearing function, the ability to please themselves and others. Ultimately, jewelry is a vehicle of emotion, not just a piece of cold metal.”