Editor’s Note
As gold prices reach unprecedented highs, the traditional jewelry market faces a paradox of value. This article examines how soaring costs are reshaping consumer behavior, industry strategies, and the very definition of luxury in the sector.
Gold prices are skyrocketing. In mid-September 2024, the international gold price broke through $2,600 per ounce, reaching a historic high. At about 112,000 won per gram, a single 1-don (3.75g) gold ring now costs well over 400,000 won—equivalent to the price of a small home appliance. The scale becomes even more staggering when viewed in larger units. A 1kg gold bar has surpassed 120 million won, and a single 400-troy-ounce (approx. 12.4kg) gold bar is worth about 1.35 billion won, a level comparable to the price of a small apartment in some areas—truly immense. This sharp rise in gold prices is causing seismic shifts in the global financial market, and South Korea is no exception. Couples preparing for marriage and the jewelry industry have been hit directly. Meanwhile, the net asset value of gold ETFs is soaring, indicating a surge in investment demand for gold. In some countries, discussions are even emerging about gold’s function as a currency substitute, evoking a sense of a bygone era. The World Gold Council is closely monitoring these trends and issuing objective analysis reports. A global reassessment of gold’s value and role is in full swing. The jewelry market is facing this powerful wave head-on. Particularly as sales of high-priced gold jewelry are taking a hit, the industry is seeking new avenues for growth. It is employing various strategies to overcome the crisis, including lighter designs, the use of alternative materials, and marketing that emphasizes investment value. Amid the whirlwind of change brought by soaring gold prices, the transformation and adaptation of the jewelry market are drawing attention.
This surge is underpinned by five major factors. First, ‘geopolitical instability’ such as the war in Ukraine, Middle East conflicts, and U.S.-China tensions. As uncertainty grows, so does the appeal of gold as a safe-haven asset. Second, ‘inflation concerns’. Central banks worldwide are battling high prices, but it’s not yet time to relax. While the pace of price increases has slowed, it still exceeds target levels. Historically, gold prices have risen during periods of inflation, and many investors are now seeking gold as an inflation hedge. Third, ‘central bank gold purchases’ continue. Emerging economies like China, Russia, and India are significantly increasing their gold reserves to reduce dollar dependence and enhance trust in their own currencies. Fourth, ‘U.S. dollar weakness’. As the dollar’s value falls, gold’s relative value rises. The purchasing power of gold for holders of other currencies increases, and demand grows further as investors seek gold as a stable store of value. Fifth, ‘U.S. interest rate policy’ has become a focal point for gold prices. Recently, the U.S. Federal Reserve implemented an aggressive policy, cutting the benchmark interest rate by 0.5 percentage points for the first time in four and a half years, shifting direction from the high-interest-rate stance maintained since the pandemic. Naturally, interest in the safe-haven asset, gold, has intensified. Amid the whirlwind brought by soaring gold prices, the jewelry industry is seeking response strategies and adapting to change.
The response strategies of the jewelry industry have become polarized. Luxury brands are emphasizing differentiation strategies and sticking to a premium line. They are using the gold price increase as an opportunity to enhance brand value, highlighting craftsmanship, and betting on limited-edition products or rare designs. They are boldly raising prices for gold models while maintaining or even expanding the use of 18K gold. This strategy reflects that consumer demand for high-end gold jewelry remains strong.
On the other hand, mid-to-low-priced brands are focusing on cost reduction. They are reducing weight by using 14K gold and increasing production of 10K jewelry online. Efforts to lower price burdens continue with hollow jewelry, silver jewelry, products mixing gold with other materials, and gold plating. Some brands are increasing the use of alternative metals like platinum or titanium while improving efficiency through designs optimized for gold usage via 3D printing or CAD. Meanwhile, the diamond jewelry market presents a complex picture. The impact of rising gold prices on diamond jewelry prices is more limited than expected, suggesting that the proportion of gold in production costs may be lower than commonly perceived. This is especially true for high-end diamond jewelry, where gold constitutes a relatively small portion of the total cost. In premium diamond jewelry, intangible elements like design, brand value, and craftsmanship hold greater weight. Consumers are also placing more significance on artistic and emotional value beyond mere raw material value when purchasing jewelry.
Minimalism has recently established itself as a major trend in the jewelry market. Small, delicate designs are in the spotlight, particularly popular among the MZ generation. The ‘layered style’ also enjoys steady popularity. This style, which involves wearing multiple thin chains, allows for personalized expression and is chosen by many. Both styles are notable for achieving maximum effect with a minimal amount of gold. Interest in sustainability and ethical consumption is also rising. Brands using recycled gold or emphasizing eco-friendly production methods are increasing, establishing themselves not just as a trend but as a new paradigm for the jewelry industry. Interestingly, there is a growing strategy of marketing gold jewelry not just as an accessory but as a product with investment value.
The surge in gold prices has also brought significant changes to investment patterns and consumer behavior. As jewelry is perceived as an investment tool, the second-hand market is booming. Recently, interest in ‘gold tech’ is rising even among the younger generation, and accessibility to gold investment has improved with the expansion of small-amount investment possibilities. Investment methods have also diversified, including ETFs, futures, and gold-based stablecoins. With the development of fintech, gold investment services utilizing blockchain technology have emerged. While these new tools increase accessibility to gold, they each carry different risks and regulatory environments, requiring caution. Meanwhile, expert opinions on the gold price outlook are divided. Predictions of a continued upward trend due to geopolitical instability and inflation concerns are pitted against warnings of potential adjustments due to tightening policies by central banks worldwide. Thus, the gold market is dynamically changing amid the emergence of new investment methods and uncertain prospects. Investors need to closely analyze this complex environment and approach it cautiously.
In times of great uncertainty, the value of gold shines even brighter. Choosing jewelry has now become a complex process that must consider not only design but also the origin of materials, the ethics of the manufacturing process, and even investment value. Amid these changes, the landscape of the jewelry market has rapidly realigned to become more consumer-centric. In this golden age, jewelry has expanded its meaning beyond mere adornment into the realms of culture, art, and investment. Even within the crisis of soaring gold prices, companies that respond nimbly to consumers’ changing needs are discovering new opportunities. As crisis and opportunity coexist, the jewelry industry is facing a more exciting phase than ever before. Amid the whirlwind of change brought by soaring gold prices, the future evolution of the jewelry market is drawing keen attention.