(November 5, 2012) - While the rising price of gold per ounce is music to the ears of those who invest in it, for those who need it to produce jewelry, the story is much different. Italy used to be the number one exporter of gold jewelry in the world, but as gold prices have risen and tariffs have taken their toll, other nations like India and the United States have started to push the European goldsmith leader from its hallowed peak position. Even at home, Italians are not buying gold jewelry the way they once were and since this accounts for close to one third of gold jewelry sales for the nation's jewelry manufacturers, there is a sense of desperation building there. According to a recent article from Reuters, Italy had enjoyed supremacy as the world's top exporter of gold jewelry for many years, both manufactured and crafted pieces being big sellers throughout the world.
What turned the tide for the gold jewelry making sector of the economy was not just the price of gold alone, although it has made things more difficult for the Italians, but also the punishing import taxation of nations like China which is home to an enormous market. High costs of employing people with the specialized skill sets needed to make the jewelry and gold prices that don't seem anywhere near dropping, have made it expensive for brands like Roberto Coin, Damiani and Bulgari to keep their prices low enough to remain competitive. Those buying gold jewelry for their shops might appreciate the cutting edge designs and styles coming out of Italy today, but that doesn't mean they are particularly inclined to take a smaller profit due to the high expense of purchasing Italian pieces. The fact is, the competition can do a comparable job at a lower price and that's something retailers, even in the fine jewelry market, have a tough time not taking into consideration.
The press reported, "The Italian industry flourished on the expertise and skills built up by family-owned businesses over generations and the international prestige of ‘Made in Italy’ design and manufacturing."
As prestigious as the nation's jewelry may be, and as idyllic as the industry itself sounds, this is not enough to keep competitors like the United States and India from shouldering into the lucrative market and carving out territory for themselves. Both of those nations now exceed Italy in the volume of gold jewelry they export each year. That's not the only competition Italian goldsmiths have to worry about though. Asia is now rising as a low production costs hot spot. Nations like Thailand, Hong Kong and even China are working to improve their quality so that they can become competitive with manufacturers in top tier jewelry producing nations. Increased competition is considered good for consumers by free market advocates, but for tradition minded Italy the situation may appear far grimmer.
Those building a portfolio of gold and other precious metals would be wise to keep an eye on how the fine jewelry market changes. After all, a significant portion of the world's gold goes to making decorative jewelry. The jewelry industry ends up having an effect on the overall price of gold as well as how its value responds to market changes.