It has recently been suggested in certain
press reports that gold jewellery (in the UK in particular)
is losing its gilt-edged status and that the modern
British jewellery lover is someone who drapes their
body with “hunks of worthless 9 carat gold crap”.
As we discuss below, GFMS believe that this is a simplistic
caricature of the UK market which re.ects a fundamental
misunderstanding of its structure and the consumer pro.le
of the typical purchaser.
Over the past decade, the UK jewellery
market has enjoyed growth rates which have been the
envy of much of continental Europe. For example, French
consumption in 2004 was 18% below the level of a decade
ago, whilst for Germany the decline was even greater
at 71%. And .nally, the 34% decline for Italy (over
the same period) left its 2004 consumption at a shade
under 80 tonnes, compared with the United Kingdom, whose
jewellery consumption was roughly 70% higher than in
1995.
During this period, much of the growth
in the United Kingdom has been driven by signi.cantly
higher demand for 9-carat jewellery and, in particular,
yellow gold articles. Despite the fact that this trend
is well known and recognised within the UK jewellery
industry, this market has been caricatured in certain
quarters as appealing primarily to a fringe sub-culture.
Nothing could be further from the truth.
Indeed, the reality is that 9-carat jewellery accounts
for the bulk of the UK market and is anything but a
marginalised niche in the jewellery space. For example,
by .ne weight, hallmarked 9-carat pieces make up more
than two-thirds of the total, but this rises significantly
when the number of articles sold is considered.
On this basis, 9-carat accounts for around
85% of total hallmarking, at close to 20 million pieces
(basis 2004 data). This is equivalent to a gross weight
of more than 85 tonnes (in other words the actual weight
of pieces sold in the UK high street) and a .ne gold
weight (factoring in the alloy composition for 9-carat
of 37.5% gold content) of a little over 32 tonnes. Furthermore,
consumer research provided to GFMS by the World Gold
Council, shows that last year 21% of women bought gold
jewellery, either as a gift or for self purchase. Hardly
marginalised and hardly niche!
The .nal .aw in this argument is eloquently
exposed when one looks at the type of pieces sold and
especially the average weight. This can be easily derived
from the above data (this is not conjecture either -
all of this data is readily available and in the public
domain). What this shows is that, on a gross weight
basis, the average weight of 9-carat pieces sold domestically
was only 4.5 grammes last year, compared with 4.7 grammes
in 1998 - a fact that .ies in the face of assertions
that this market has moved to heavier pieces. From a
gold offtake perspective, the fallacy of this assertion
is all the more evident if the .ne weight of 9-carat
sales is used instead. On this basis, the average weight
falls to just 1.6 grammes of gold! This low weight also
contributes to largely affordable retail prices, which
in turn fully democratises the jewellery market in the
UK.
At the other end of the spectrum is the
22-carat segment. In terms of the number of articles
sold its share of the hallmarked total is only 3%, although
this rises to 11% on a gross weight basis. However,
in sharp contrast to the 9-carat segment, the average
weight (again, in terms of the gross, or actual weight
of jewellery sold) is more than double that of 9-carat,
at over nine grammes! This is hardly surprising, given
that the bulk of the 22-carat market is accounted for
by relatively large, investment pieces, such as bangles
- hardly the territory of your average “chav”!
The contrast with the bulk of 9-carat
purchases could not be clearer. Although there is an
element of large 9-carat purchases (such as heavy chains)
this represents only a small fraction of the market,
a point which is clearly highlighted by the earlier
analysis on average weights (even allowing for the importance
of hollow ware jewellery).
Finally, this discussion would not be
complete without reference to the 18-carat sector. By
2004, this had achieved a record level of sales, with
its share of hallmarked items rising to over 10% - hardly
suggestive of sophisticated and wealthier buyers having
been put off by 9- carat. Indeed, this growth has partly
been achieved through a degree of upgrading from lower
carat articles (and has also been accompanied by a shift
towards higher end, heavier pieces). Once again, the
data (which is readily available if the effort is made
to obtain it) reveals an average gross weight for 18-carat
sales of over .ve grammes, (although this has also been
in decline; in 1998 it stood at close to six grammes),
nearly one-.fth higher than for 9-carat products.
What conclusions can be drawn from this
analysis about the UK gold market? Overall, average
weights have been steady over the past 10 years, but
actually declined in 2004 - certainly they have not
been rising as has been suggested elsewhere. Consolidating
the above results (and including the niche 14-carat
sector) reveals that the average gross weight of products
going out of the jewellery store is just 4.5 grammes.
With regards to 9-carat, it is the dominant sector in
the UK market (and indeed has been the dominant carat
standard for over a hundred years), has enormous appeal
across a wide section of the public and, looking at
its sales over the past decade, it is patently clear
that it does not suffer from an image problem. Furthermore,
the segmentation of the UK jewellery market is in fact
one of its key strengths. Finally, some of the lightest
pieces sold in the United Kingdom are 9-carat, a point
which has been lost on some market commentators.
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