Demand for gold jewellery to rise after global lockdowns are lifted

THE value of Malaysian gold jewellery export is likely to plunge by 70% to 80% this year from US$6.3bil in 2019 due to the outbreak of Covid-19.

Penang Goldsmith Association (PGA) adviser Joeson Khor tells StarBizWeek that if the global lockdowns continues into the second half, the value of gold jewellery exported from Malaysia will dip by 70% to 80% from 2019.

“Because of lockdowns imposed worldwide, the export sales of gold jewellery from Malaysia has dropped correspondingly by 18.6% for the first quarter to RM1.21bil compared to RM1.49bil in the same period of 2019.

“Gold merchants have not been able to travel overseas to deliver their products because of the lockdowns and quarantine policies.

“We will see a 70% to 80% drop in the export value of gold jewellery if the global lockdowns continues into the second half, ” he says.

Khor says gold jewellery retail sales dropped because customers have not been able to come out to shop, causing the demand to dip.

“We have so far seen a 30% plunge in the retail sales of the country. Since May 4, the retail sales have improved slightly due to the Ramadan celebrations, ” he says.

Khor says this is the worst crisis the gold jewellery sector has faced for the past two decades.

“It is worse than the Asian financial crisis of 1997 and the sub-prime crisis of 2008, ” he adds.

The price of gold has shot up to US$1,750 per ounce from US$1,280 per ounce in June 2019.

“We can expect the price of gold to hit at least US$1,880 per ounce by August.

“Gold price has risen because gold is seen as a safe haven in times of uncertainties.

“Once the global lockdowns is lifted, the demand for gold jewellery will increase, ” he adds.

About 80% of Malaysian gold jewellery exports come from Penang-based manufacturers and exporters.

More than 60% of the 650 PGA members are small and medium-sized companies with an annual turnover of less than RM25mil.

A recent Malaysia External Trade Development Corp (Matrade) report showed that for the first three months in 2020, Malaysia’s total exports of jewellery of gold, silver and platinum decreased by 18.6% to RM1.21bil as compared to RM1.49bil in the same period of 2019.

The top three buyers of Malaysian gold jewellery are UAE, Singapore, and Japan for the first quarter of 2020.

During the same period, Malaysia’s total imports of jewellery of gold, silver and platinum decreased by 19.6% to RM0.42bil as compared to RM0.53bil in the same period of 2019.

According to a recent World Gold Council report, the total demand for the first quarter 2020 grew marginally to 1,083.8 tonnes.

The report says the coronavirus outbreak is the single biggest factor influencing gold demand.

Gold-backed exchange-traded funds (ETFs) attracted huge inflows that pushed global holdings in these products to a new record high of 3,185 tonnes.

“Jewellery demand, unsurprisingly, was particularly hard hit by the effects of the outbreak; quarterly demand dropped 39% year on year (y-o-y) to a record low for our series of 325.8t, ” the report says.

Courtesy: The Star