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Gold prices are up. But jewelers like Bulgari have low expectations for 2009

Today's Financial News - Posted November 28, 2008

Gold may have gained… but its biggest users (like Bulgari) expect demand to continue falling.

by J. Christoph Amberger

Baltimore — (TFN): “Gold Has Biggest Monthly Gain in Nine Years on Demand for Haven,” trumpets Bloomberg.com’s Halia Pavliva today. “Gold prices rose in New York, capping the biggest monthly increase in nine years, on demand for a haven following terrorist attacks in India.”

O my.

Buying gold as a haven against sociopathic mass murderers. How about a blankie to go with it, or a pair of gasloshes?

Once again, the American consumer is coming to the aid of a troubled asset. This time around, it’s not blue collar Joe Sixpack and his credit card or home equity line. But the ultra-libertarian gold bug who is betting that gold-backed currencies will be making a come-back right alongside the Volkswagen Scirocco. Or, please… a Hallmark Hall of Fame technicolor depression during which flipping a 1/10-ounce gold coin from one’s stash will make you king of the world. Or at least king of the Boumi Temple…

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Problem is that hard money buyers represent only a small smidgen of global gold demand. In fact, 60% of global gold buying is done by jewelers. And jewelers are dreading the new year. Bulgari SpA, for one, the world’s third-largest jeweler, expects 2008 net income and profit to come considerably lower than last year. Q3 net income fell 44 percent. Bulgari shares have dropped 49 percent in the past year. The company now plan to cut costs “without negatively impacting the company’s image.”

I don’t know about you. But at a time in which the CEOs of multi-billion-dollar companies are being tarred and feathered for taking the corporate jet instead of JetBlue, (some even foregoing compensation), investment bankers being laid off, and hedge fund managers cutting checks to return principal to fuming investors, I don’t quite see armies of trophy wives being decked out in fresh bling.

Conspicuous consumption may not be dead yet… but it will contract until a considerable number of its suppliers are. In this regard, jewelers and other gold-consuming industries are not at all different from the processors of base metals.


Next Article: The start of a very odd week

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Posted by J. Christoph Amberger · Filed Under Gold and Resources 

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