By Michelle Graff
After years with De Beers, Sally Morrison joined the World Gold Council in 2012 and is now the organization’s managing director of jewelry. Marcus Grubb is the managing director of investment strategy.
New York--U.S. demand for gold jewelry rose again in the third quarter, hitting its highest level in five years. 

This is according to figures from the most recent quarterly report released by the World Gold Council, which shows that gold demand was, in fact, up 4 percent year-over-year in the United States.

Following the release of the report, National Jeweler had the chance to chat with Marcus Grubb, the council’s managing director for investment strategy, and Sally Morrison, managing director for jewelry, about what price points are driving this demand, the challenges for gold jewelry going forward and how LoveGold is working to help younger consumers understand the value of things that last.

National Jeweler: Looking at the most recent Gold Demand Trends report, the United States seems to be coming back into focus as an important market for jewelry. Can you speak to that? 

Marcus Grubb: From the point of the overall gold market, the figures in Q3 were particularly interesting for the United States, and for jewelry demand in particular. 

We had a rise of 4 percent to 34 tons, the highest Q3 since ‘09, and I think it’s six or seven quarters in a row (of) recovery of U.S. jewelry demand from the point when we hit bottom several years ago. I think it is illustrative of what (is happening) on a more macro-economic level--that the U.S. economy is the best of the bunch in terms of the OECD (Organisation for Economic Co-operation and Development.) 

You’ve seen improvement in consumer confidence, a lot of economic indicators have been significantly better in the United States than in other countries. I would say purely from a macro-economic view you are seeing that feed into increased consumer demand in the United States for jewelry.

Jewelry demand increases, consumer demand increases with the improving economy and improving wealth. 

NJ: You mentioned improving wealth but in the U.S. we definitely see symptoms of a shrinking middle class here. So, when we are talking about increased demand for gold jewelry, the question is: who’s selling gold, and at what price points? 

MG: My understanding is that in the U.S., I do think the high-end karat market has been improving and that is where quite a lot of the spending is. As you rightly point out, the market is somewhat bifurcating but the increases in volume have been in the higher end with relatively high karat jewelry and relatively pure jewelry. 

Sally Morrison: I think you are right about the high end. Certainly over the last several years when the gold price was very high we saw this resurgence, this re-premiumisation, if you will, of yellow gold jewelry at the top end of the market. I think part of that was, let’s face it, there’s some badge value in  wearing yellow metal when the prices are soaring and you don’t want people to think it might be silver. I think for sure that was there.

But I think our hypothesis was there was something bigger out there, which was really why we launched LoveGold. We felt that part of it was a younger consumer needed to rediscover and fall in love with again fine gold jewelry. 

We’re about 18 months into it now. We have discovered many, many, many young interesting young jewelers working in yellow and rose gold. And I think they are selling. I do not have data but I can tell you there is no shortage of people now doing interesting work in yellow metal, in fine gold. 

If you want to bring young consumers into the category, you have to meet price points. I think that’s about being inventive and innovative in the way you design and present. I think there is activity in the middle area … but that’s not $100 or $200, I would say that’s $500 to $1,000. Amongst our community, which now is over 600,000 people worldwide, one of the dominant questions is, “Where can I buy this?” 

The fact that the younger people are asking and the fact that they we’re finding a lot of young, interesting jewelers working in 18-karat and, to an extent in 14-karat, I think that means there is activity there, otherwise they wouldn’t all be doing it. 

NJ: Does that mean that what you are seeing is in terms of gold price point is activity at both the high and low ends of the market? 

SM: That’s where I think it’s active. The $500 to $1,000 is very much the entry price point. Still, even at today’s gold prices, it’s very hard for a big chain retailer to have an offering for their customers at $100 or $200. The piece would be so small you could barely see it. In the $500 to $1000 (range) I feel there is some opportunity for creativity to inspire those consumers’ interest. 

The other thing that I think is very interesting for us to note here is that Anthropologie--very much known for its costume jewelry--has just launched a fine collection from a number of different designers, a lot of things at those price points … An area of interest for them is fine jewelry for the younger consumers. I think it’s (demand for karat-gold jewelry) there. They can’t all be wrong.

NJ: Do you think the gold price is going to increase going forward? 

MG: Yes. This is a base for the market. The medium-term picture of demand suggests the gold price should go up because, effectively, the demand is going to exceed supply. Recycling is down, mine production is going to fall next year, demand is probably going to grow next year, driven by jewelry but also driven by regional demand in India and China and central banks as well. That would all suggest the price should return to an appreciating profile. 

Those analysts who think that gold could go a lot lower from here, they are sort of harking back to the bear market days when gold fell 15 years in a row, way back in the 80s and the 90s. But if you look at the factors that caused that to happen, none of them are in place now. Central banks were dumping gold, now they’re buying; interest rates were rising and very high, now they’re very low and they’re not going to rise very much. Mining companies were selling gold forward, what’s known as hedging. They are not doing that now and they don’t want to, so you had an excess supply back then and you don’t have it now. The other thing was you didn’t have the Asian demand in those days. Asian demand was much smaller in those days than it is today. I think the bears have a real problem. They are not supported by the facts. 

NJ: If we see the gold price rise steadily, will we eventually again hit a point where gold jewelry is too expensive for most people to buy? 

MG: If it does return to a balanced situation of demand and supply with a gently rising price profile, that gives support for the wealth of the consumer to keep pace or exceed the rise in the gold price, which is really what it’s all about. Consumers thought $500-an-ounce gold was expensive at one point, then they thought $800 gold was expensive but you still saw jewelry demand recover again. It isn’t an absolute. It’s a footrace. 

NJ: Getting back to LoveGold, can you talk a little about what LoveGold has taught you about the consumer in the U.S.? 

SM: It’s taught us a lot about the young consumer everywhere. The younger consumer is globally interested. The young consumer wants to discover things that may not be where she lives. She wants to be part of this international tribe of people who have common interests in terms of fine jewelry design. 

The young 25-year-old in Beijing may have more in common with that woman in London or Paris than, in fact, someone in her own country. They are united by a series of interests and consumer desires.

I also think that … we’ve constantly had these questions about “where can I can I buy this?” which suggests to me there is still a huge opportunity in jewelry to create an innovative and interesting offering that these people don’t see. There’s a hunger, there’s a pent-up demand for great jewelry where they live and they are not seeing it yet. (There’s a) huge opportunity for growth in the category, probably in those opening price points, and probably a digital offering because that’s the only way you could efficiently get to these people where they live. 

I would [add that] I think Anthropologie is incredibly smart … They see an opportunity (in fine jewelry) and they’re going after it. Their background is in fashion and time and time again we’ve seen fine jewelry lagging behind other kind of offerings in the luxury space … We have to catch up with our friends and colleagues in fashion. We have to be as good at marketing and merchandising a beautiful gold bracelet as we are at bringing them a fantastic Marc Jacobs handbag. And, by the way, it’s (jewelry) coming in at the same price and it’s going to be something enduring, that they can keep forever, that they can pass down to later generations. It’s not disposable. 

We’ve raised a generation of consumers to want disposable things … We need to train young people to want beautiful things that you can keep forever, that you can pass on. Our whole holiday campaign (#FutureHeirlooms) is about this. We want people to understand why certain things are important: because they last.  

NJ: You said that it’s time for jewelry to “catch up” with fashion in terms of marketing and merchandising. Do you think the industry could use another LoveGold, another innovative site that employs social media and bloggers in the way LoveGold has done?

SM: That’s a role we feel that we can offer to our colleagues in the trade. We link directly to e-commerce so we are hopefully providing a gateway to people once they’ve fallen in love with something to link through and buy something from that jeweler.  

Does that need to be more of that? Sure, there needs to be more of it. But I think we see ourselves as very much as a kind of facilitator of the industry to bring this kind of digital insight and highly creative editorial into the jewelry category for the benefit of the jewelry trade, for the benefit particularly of small brands that can’t put together that kind of plan for themselves.  

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