The COVID-19 pandemic has single-handedly transformed the entirety of the global economy.
To date, 185 out of the 195 total countries have been affected by the virus in some way. Countries all around the world have invoked total lockdowns, with the IMF declaring the impact to be the worst since the great depression in the 1930s.
The number of people who are unemployed has hit an all-time high, with more than 30 million people filing for unemployment in the USA within the last six weeks alone. While a handful of companies, such as technology, video conferencing, online grocery stores and medical companies have flourished, a lot of markets have been brought to a standstill, such as the jewelry industry.
Jewelry suppliers and artisans are facing various production-related issues, with every aspect of the industry having been affected in 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 overall has led to an accumulation of surplus materials globally, even in spite of the decreased mining and production.
China, the world’s largest producer of fashion jewelry, has seen a systematic closing of factories and stores, while the export of raw materials from countries such as India and Hong Kong have dried up as well.
With the various countries on lockdown, many European and USA based brands that depended upon these countries for outsourcing and production have seen a massive hit in not only supplies, but sales as well. And unfortunately, the situation might not improve for quite some time to come.
While mining equities had previously seen a steady increase in value over the past year, after the worldwide panic sell-off from February 2020 and onward happened, a 29% decrease in the total market value has been registered.
The global decrease in demand has also led to a steep fall in prices of virtually every metal, apart from the temporary surges that happened in gold and silver prices.
Moreover, the countrywide lockdowns resulted in decreased drilling, exploration, and pipeline activities. The major crux of these industries, migrant laborers, have borne the worst of the brunt, as far as workers are concerned.
Finally, governmental institutions and companies have also seen a sudden decline in available resources and sales, being forced into stopping all production activities for the time being.
Within this unfortunate scenario, the private sector has been left unaided and has struggled to deal with all of the financial consequences
While the jewelry industry is only one of the many industries that treat expensive metals like silver and gold as raw materials, most of the market has come to a standstill, which only further serves to disincentivize production.
Hence, the procurement and import of raw materials has become difficult, with owners and artisans becoming reluctant to resume production due of the sudden surplus. Thus, suppliers have thus been left with little choice but to cut their losses and just wait for the pandemic to subside and the supply chain to recommence eventually.
While it should be noted that even before the pandemic the fine jewelry industry had been seeing a stagnancy in sales due to a sharp rise in prices combined with a shift towards smaller designs and artists, the pandemic has brought forth a full-blown crisis than cannot be written off nonetheless.
Even if bigger brands are well equipped to patiently wait it out, a lot of smaller businesses are in danger of turning in losses around the globe.
Many high-profile luxury jewelry brands depend upon attending jewelry summits and shows in order to garner potential buyers' interest and attention; but, due to the pandemic, a vast majority of them have either been postponed or even cancelled altogether.
While businesses and summits might resume over the next two months, the overall loss of disposable income, along with the resulting decrease in demand, might lead to a further degradation of jewelry businesses overall.
The combination of a slowing economy and the loss in disposable income have led to a 39% decrease in the quarterly demand for gold jewelry in the USA. A similarly steep decline can be seen in the demand for diamonds, with it accounting for 50% of the total global demand.
While within in the first two months of this year an increase in demand was registered, it has considerably plummeted since than. Even the markets where gold and diamonds are traditionally seen as valuable assets have been faced with stagnation. China has been registering a steep decrease in its diamond demand, while the Indian gold industry has seen its yearly spikes in sales during the festive periods being marginal at best.
Globally, there has been a 26% decrease in the demand for jewelry, which is the steepest decline recorded, within a calendar year, in almost 50 years.
This loss of income has led to a global anxiety, which thus is resulting in an increase of people who are choosing to liquidate their assets. While this has made gold and silver one of the best-performing assets in recent months, this spurt is extremely volatile, and will subside once the pandemic reaches its second stage worldwide. The prices of softer metals and gemstones, like diamonds and rubies, have seen a steady decrease since December of 2019.
With retail sales virtually non-existent, small jewelry stores and craftsmen have been forced to shut their shops down altogether for the time being, while bigger businesses have begun training their employees in online retailing and contactless delivery strategies. Almost 70% of jewelry retails stores worldwide have been temporarily shut down. While people in various regions have actively called for shops and malls to be reopened, it currently only seems like nothing more than a distant possibility, for the time being.
On one hand, the supply chain has been thoroughly disrupted with exports, imports, and mining related activities being brought to an absolute standstill in most parts of the world. On the other, due to rising rates of unemployment and thus dwindling disposable incomes, the demand for jewelry has been at an all-time low. And sadly, the situation is set to continue until the pandemic is over and global industrial activities can safely resume once again.
COVID-19 in the USA has already caused widespread loss of life, with more than 1,000,000 people having already been infected. What has made the situation especially difficult to contain and control is due to the fact that the symptoms of COVID-19 often do not even show for those infected, until around 15 days after initially contracting the virus.
Needless to say, the situation currently at hand is unprecedented, and there are many important issues that need to be solved before normalcy can even have a chance at resuming.