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Faltering Chinese Jewelry Manufacturers Hits Gold Market

Last Updated on 2016/05/18

With one of the largest economies in the world, it shouldn’t come as any surprise to anyone who follows the gold market that China is a huge influence on this crucial metals market. Recent problems with manufacturers in the country has left many in the trade of jewelry supplies concerned regarding the stability of the gold market in general and the Chinese jewelry trade in particular. Gold leasing in China is big business, with the top four banks in the country holding critical leases. Could gold prices go even lower as a result of this?

Jewelry Maker Defaults

Many Chinese banks are facing defaults by the smaller players in the market and see it as a trend to be feared within the country. Its impact on the world gold market could be a recipe for disaster. Even with the general cautious approach that many banks have for as volatile a commodity as gold, these defaults could cause gold prices to tumble and leave banks holding worthless paper in their hands.

Chinese Imports Affected

Of course, since gold is widely exported in China, this drop in the market as well as a loss in the confidence of the Chinese gold market could also mean a big impact on the import market for the country. Loss of confidence may mean that Chinese importers cannot command the kind of exchanges they have in the past, with the yen continuing to drop against the U.S. dollar.


The Changing Face of China

One of the big reasons for the drop in retail sales of gold jewelry in China is the changing tastes of the Chinese people themselves. Gold jewelry, once a staple of the country as a way for anyone to show their wealth, has continued to lose popularity. The westernization of the Chinese people has led the way to new shows of wealth such as in cars, property and out of country real estate. As a result, true wealth is no longer held in accumulating gold jewelry. Thus, the changes in the retail market are bound to continue until the gold jewelry market can find an answer to this shift in the retail demand.

Retail Gold Sales

At the end of the trail is the price of gold jewelry in the retail trade. In some ways it is a case of the tail wagging the dog, since retail sales are the result of low gold prices but when retail sales of gold jewelry in China drops, so does the value of all Chinese products against this backdrop. Banks will be left to begin limiting the amount of leasing they are willing to do against projected gold sales if the manufacturers continue to fail on their loans.

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