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Marginal Improvement in Jewellery Sales during US Holiday Season
Jewellery sales during the just concluded US holiday season are said to have registered a very modest improvement, mostly in value terms compared with the earlier season. However, some individual firms might have fared better than the rest, in view of their long established brand-image. Tiffany, however, sounded a warning for profits for 2012.
By: Diamond World News Service
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Feb 18 2012 5:53PM
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Reference: 6742  

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Expectations Not Realised
Earlier expectations about holiday sales in general did not materialise. This can be seen from the fact that actual sales did not come near the National Retail Federation’s earlier prediction of a 3.8 per cent rise in overall retail sales during the holiday season. This is further corroborated by the US Commerce Department’s announcement at the end of the season that retail sales in December 2011 rose just 0.1 per cent, compared with 0.4 per cent in the previous month. Improvement in overall retail sales in December was thus the weakest in seven months as the rise in job-losses possibly impacted consumer sentiment.

Unsold Stocks
The marginal improvement in overall retail sales was spread across several segments as shoppers had their own preferences. According to reports, shoppers this time spread their money across electronics, T.V. sets, apparel, domestic requirements, footwear and jewellery. However, jewellery remained low on most shopper’s lists. All this means that many jewellers were left with substantial unsold stocks, despite heavy discounts being offered by them to attract buyers.

Polished Prices Down
Meanwhile, the market for polished diamonds which started moving into reverse gear since August 2011, is yet to regain stability. This can be seen from the fact that the prices of polished stones moved down by 20-25 per cent in the last one month, according to trade circles. In certain categories like Minus-2, the decline was said to be as much as 40 per cent. On an average the fall in prices was said to be around 10-15 per cent during the period. Moreover, even as prices moved down, those who might have otherwise come forward to make purchases seemed to adopt a ‘wait-and-watch’ policy.

Cautious Lending by Banks
All this made it very difficult for several firms to dispose of their stocks of high cost rough or high cost polished diamonds and prompted the banks to be more cautious about lending more as they already had high exposure to this trade. The tight money conditions also meant that loans from non-banking sources commanded interest rates ranging from 15-20 per cent per annum.

Manufacturing Activity Slows
In view of the sluggish market for polished diamonds and accumulation of unsold stocks, some of the manufacturers are reportedly now operating much below their capacity. They will step up their manufacturing activity depending on improvement in demand.

Polished Export Shipments Sluggish
This has resulted in the tempo of shipments slowing down which is evident from the fact that dispatches of cut and polished diamonds in the first eight months of 2011-12 totaled US$ 16,447.95 million (Rs. 75,971.03 crore) compared with US$ 16,426.16 million (Rs. 75,192.90 crore) in the same period of the earlier year, showing an insignificant improvement of just 0.13 per cent in dollar terms and 1.04 per cent in rupees. This indicates reluctance on the part of foreign buyers to step up purchases. Imports of Rough Up
Imports of rough diamonds during the period under review, however, rose to US$ 9,907.24 million (Rs. 45,604.25 crore) from US$ 7,407.23 million (Rs. 33,878.19 crore) in the same period of the previous year. This reflects a jump of 33.75 per cent in dollar terms and 34.61 per cent in rupees.
The import of cut and polished diamonds during this period also moved up a little to US$ 10,911.22 million (Rs. 50,130.31 crore), compared with US$ 10,638.25 million (Rs. 48,737.64 crore) in the same period of the earlier year.

Gold Jewellery Exports Rise
Exports of gold jewellery during the period under review rose smartly to US$ 10,841.51 million (Rs. 50,427.95 crore) compared with US$ 6,283.93 million (Rs. 28,704.22 crore) showing a jump of 41.93 per cent in dollar terms and 44.93 per cent in rupees. This was largely due to rise in gold prices.

Silver Jewellery Strong
Shipments of silver jewellery during the period of review also rose to US$ 452.54 million (Rs. 2,115.35 crore), from US$ 336.13 million (Rs. 1,532.86 crore) in the same period of the earlier year.

Bullion Rises in Rupee Terms
Strong US dollar continued to act as a brake on bullion prices. This affected investment demand for the yellow metal. Weaker rupee made gold expensive in India. The yellow metal might turn volatile, if relations between the US and Iran deteriorate. Meanwhile, in the overseas market gold was placed on 16 January, 2012 at US$ 1644.01 per ounce, while silver was quoted at US$ 29.85 per ounce. In the domestic market standard gold was quoted on the same day at Rs. 27,470 per 10 gms, while silver was traded around Rs. 52,190 per kg. The under tone of the market seemed hesitant.

Market Trends
• Holiday Sales Expectations Not Realised
• Unsold Stocks
• Polished Prices Down
• Cautious Lending by Banks
• Manufacturing Activity Slows
• Polished Export Shipments Sluggish
• Imports of Rough Up
• Gold Jewellery Exports Rise
• Silver Jewellery Strong
• Bullion Rises in Rupee Terms

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