HONG KONG (BLOOMBERG) – Sales of gold jewellery in China are set to plummet this year as the economic damage from the deadly coronavirus crisis widens.
The death toll from the outbreak has topped 1,100 and shoppers are staying away from public places to avoid infection, while also limiting their spending to basic necessities such as groceries. Jewellery retailers such as Luk Fook Holdings International Ltd. are shortening business hours and managing time off for employees in an effort to prevent the disease from spreading.
"People are not in the mood to shop for jewelry," said Zhang Yongtao, chief executive officer of the China Gold Association. "Stores and shopping malls are closed because of the virus," he said, adding that sales of gold jewellery and bars will drop substantially this year.
Metals Focus, a London-based research firm, sees a 6 per cent drop in sales in China this year, extending an estimated 7 per cent drop in 2019 to a seven-year low. It said the decline could turn out to be "particularly acute" given the Lunar New Year has traditionally been the busiest period.
The crisis comes at a time when physical demand is already suffering in China and India, the world's largest gold consumers, due to rising prices and slower economic growth.
Retailers are already reeling from the long-running, pro-democracy protests in Hong Kong — and Luk Fook saw a significant drop in store sales and daily retail traffic across mainland China, Hong Kong and Macau during the Lunar New Year, according to deputy chief executive officer Nancy Wong. The company has implemented some staff-cost saving measures and launched Valentine's Day promotions to cushion the impact of the virus.
Bullion is trading near the highest level since 2013 on lower interest rates, and as geopolitical tensions and the virus outbreak sent investors in search of haven assets. If the spread of the disease continues to accelerate or develops into a pandemic, prolonged weakness in the Chinese economy and its impact on global markets should provide a strong boost to gold, Metals Focus said last week.
Spot gold was little changed at US$1,567.29 an ounce on Wednesday, and is up 3.3 per cent this year after posting an 18 per cent surge in 2019.
Hong Kong retailers could see their profit from the city drop in 2020 amid the outbreak, according to Bloomberg Intelligence. Chow Tai FooRead More – Source