The Coronavirus pandemic has single-handedly transformed the global economy. Till date, 185 out of a total of 195 countries have been affected by the virus. Countries affected by coronavirus around the world have invoked total lockdowns, and midway through the crisis the IMF has declared the impact to be the worst since the great depression of the 1930s.
The number of people left unemployed has been at an all-time high, with more than 30 million filing for unemployment in the US in the last six weeks alone. While a handful of companies, particularly technology companies, video conferencing portals, online grocery stores and the medical industry have flourished, most markets have been brought to a standstill, and the jewelry industry is no different.
Jewelry suppliers and artisans are facing various production-related issues and every aspect of the industry has been affected, one way or another. While moving to the online market has allowed companies to stay profitable over the first quarter of 2020, the lack of sales has led to an accumulation of surplus material globally, in spite of decreased mining and production.
China, the world’s largest producer of fashion jewelry and the country where the virus originated from, has seen a systematic closing down of factories and stores, while the export of raw materials from countries such as India and Hong Kong have dried up. With the country on lockdown mode, many European and US-based high profile brands that depend upon China for outsourcing and production have seen a massive hit in both supply and sales, and the situation might not improve for quite some time to come.
Further, while mining equities had seen a steady increase in value over the past year, the worldwide panic sell-off began in February 2020, and since then has a 29% decrease in the total market value has been registered. The global fall in demand has led to a steep fall in prices of almost all metals, apart from the temporary surges in gold and silver prices.
Moreover, countrywide lockdowns have resulted in decreased drilling, exploration, and pipeline activities, with a major crux of these industries fueled by migrant laborers who have arguably borne the worst of the brunt, as far as workers are concerned.
Finally, government institutions and companies have also seen a sudden decline in available resources and sales, and have been forced into stopping production activities for the time being. In such a scenario, the private sector has been left unaided, and has struggled to deal with the financial consequences.
While the jewelry industry is only one of the many industries such as dentistry and technological companies, that treat expensive metals like silver and gold as raw materials, most of the market has come to a standstill, further disincentivizing production.
Hence, the procurement and import of raw materials has become difficult, and owners and artisans have been reluctant to resume production because of the sudden surplus. Suppliers have thus been left with little choice but to quit their losses and wait for the pandemic to subside and the supply chain to recommence.
While it must be noted that even before the pandemic the fine jewelry industry had seen a stagnancy in sales due to a sharp rise in prices and a shift towards smaller designs and artists, the pandemic has brought forth a full-blown crisis, no less.
Even if bigger brands are well equipped to patiently wait it out, smaller businesses are in danger of turning in losses around the globe. Most high profile luxury brands depend upon jewelry summits and shows in order to garner interest and buyers’ attention, but the pandemic has seen to it that a vast majority of them have either been postponed, or canceled altogether.
While over the next two months, businesses and summits might resume, the overall loss of disposable income and the resulting decrease in demand might lead to further degradation of jewelry businesses.
A slowing economy and the loss in disposable income have led to a 39 percent decrease in the quarterly demand for gold jewelry in America, and a similarly steep decline in the demand for diamonds, of which it accounts for 50% of the total global demand.
While in the first two months of the year an increase in demand was registered, since then it has considerably plummeted. Even the markets where gold and diamonds are traditionally seen as valuable assets have seen stagnation, with China registering a steep decrease in its diamond demand. The Indian gold industry has also been adversely affected, and the yearly spikes in sales during the festive periods have been marginal at best.
Globally, there has been a 26 percent decrease in demand for jewelry, which is the steepest decline recorded in a calendar year in almost fifty years. The loss of income has led to a global anxiety resulting in an increase in people choosing to liquidate their assets. While this has made gold and silver one of the best-performing assets in recent months, the spurt is volatile, and will surely subside once the pandemic reaches its second stage worldwide.
On the other hand, prices of softer metals and gemstones like diamonds and rubies have seen a steady decrease since December 2019.
With retail sales virtually non-existent, small jewelry stores and craftsmen have been forced to shut shop altogether for the time being, while bigger businesses have begun training their employees in online retailing and contactless deliveries. Almost seventy percent of worldwide jewelry retails stores have been temporarily shut down, and while people in various regions have actively called for shops and malls to be reopened, it seems a distant possibility, for the time being at least.
On one hand the supply chain has been thoroughly disrupted, with exports, imports and mining-related activities brought to an absolute standstill in most parts of the world. On the other, due to rising rates of unemployment and dwindling disposable incomes, the demand for jewelry has been at an all-time low, and the situation is set to continue until the pandemic is over and global industrial activities resume.
Coronavirus in the US has already caused widespread loss of life, with more than a million people having already been infected. What has made the situation difficult to contain is the fact that symptoms of coronavirus often do not show until around fifteen days after contracting the virus.
Needless to say, the situation at hand is unprecedented, and there are far more important issues that need to be solved before normalcy can resume.