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US consumers demand higher caratage of gold

February 26, 2014 11:00 IST

US consumers demand higher caratage of gold

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Dilip Kumar Jha in Mumbai

Consumers in the US are increasingly opting for higher caratage of gold in diamond-studded ornaments, as this has high resale value.

This will benefit India more than any other country, as 38 per cent of the jewellery consumed in the US is sourced from India.

The US accounts for about 40 per cent of the global jewellery consumption.

“Now, jewellery buyers in the US have started looking at the real (resale) value of jewellery. Instead of nine-carat gold earlier, consumers are demanding 14-, 18- and 19-carat gold in diamond jewellery,” said Somasundaram PR, managing director, World Gold Council (India).

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Image: A goldsmith arranges gold bangles at a jewellery shop.
Photographs: Murad Sezer/Reuters

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“The changes in US consumers’ behaviour will benefit India immensely, in terms of higher value of jewellery, which will translate into increased revenue and profits for jewellery exporters. Margins will be higher, too,” he added.

In 2013, gold demand in the US stood at 121 tonnes, against 974.8 tonnes in India.

While Indian consumers preferred pure gold, those in the US sought diamond-studded gold ornaments.

“Many customers who shifted to silver jewellery articles when gold prices were high have now started coming back to gold,” said Vipul Shah, chairman of the Gems & Jewellery Export Promotion Council, an exporters’ body under the Ministry of Commerce & Industry.

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Image: A pawn shop worker sorts through gold jewellery at Easy Money Pawn shop.
Photographs: Athit Perawongmetha/Reuters
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Early last year, gold prices soared to about $1,900 an ounce, before declining to $1,200-1,350 an ounce.

To reduce its burgeoning current account deficit, the Centre had imposed a number of restrictions to curb gold import into the country.

Somasundaram said despite the curbs, gold demand continued to remain high, resulting in gold coming into the country through unofficial channels.

India processes 11 of every 13 rough diamonds mined globally.

“We are exporting diamond jewellery containing 14- and 18-carat gold to the US, against nine-carat earlier, owing to the phenomenal shift in consumer behaviour after the recent price rise in gold.

"This year, we are aiming for higher revenue from the US, despite sales in that country remaining under pressure until recently,” said Mehul Choksi, managing director of Gitanjali Gems, which operates 105 retail stores in the US.

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Image: A sales assistant arranges gold necklaces at a store in Lianyungang, Jiangsu province.
Photographs: China Daily/Reuters

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The US contributes 13 per cent to the company’s annual sales.

Choksi said this year, the share was likely to rise to 15-16 per cent.

SHINING AGAIN

  • Now, consumers in the US prefer 14-, 18-carat gold, against nine-carat earlier
  • The US sources 38% of gold from India; it accounts for 40% of global jewellery demand
  • Indian jewellery exporters' revenue, profits to increase on higher margins
  • In 2013, gold demand in the US stood at 121 tonnes, against 974.8 tonnes in India
  • The US's share in Gitanjali Gems' annual sales is set to rise from 13% to 15-16%

 


Image: Valuer Eve Chong, demonstrates the valuation process for jewellery at a MoneyMax pawn shop outlet.
Photographs: Edgar Su/Reuters
Tags: US , India , Choksi

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