GEORGE TOWN: The value of Malaysian gold jewellery exports will likely stay flat at RM6.4bil this year, says Penang Goldsmith Association (PGA) adviser Joeson Khor.
He added that high gold prices would likely hinder consumers from buying jewellery.
“Consumers would want to wait for gold prices to soften before shopping for gold jewellery products,” he said.
According to the Malaysia External Trade Development Corp, Malaysia exported about RM6.4bil worth of gold jewellery in 2022 compared with RM4.8bil in 2021.
From January to February 2023, the overseas sales of Malaysian-made gold jewellery dropped to RM857mil from RM923mil achieved in 2022 in the same period.
The top buyers in 2022 were Singapore, the United Arab Emirates (UAE), Australia, Japan, Canada, and Hong Kong.
“The continuation of the Russian-Ukraine War would boost the attraction of gold as a hedge against inflation.
“As long as the Fed continues with moderate rate hikes, we can see the price of gold shooting up. However, high gold prices may slow down the sales of retail gold jewellery,” he pointed out.
Khor added that Singaporeans started to buy more gold jewellery in 2022.
“Singapore will continue as a top buyer of Malaysian gold jewellery products primarily because of a weaker ringgit that yields attractive exchange rates.
“The forecast for 2023 is that the Singaporeans will spend US$1.2bil (RM5.3bil) on jewellery products, of which 40% or US$504mil (RM2.2bil) are for luxury jewellery comprising gold, platinum, and silver,” he said.
About 80% of Malaysian gold jewellery exports come from Penang-based manufacturers and exporters. More than 60% of the 650 PGA members are small and medium companies with an annual turnover of less than RM25mil.
Meanwhile, Malaysian Institute of Economic Research research head Shankaran Nambiar said high gold prices usually deter consumers from buying gold jewellery.“When gold prices soared in March 2022, gold jewellery retailers in India saw their sales plunge by 25%.
“There is such a correlation between high gold prices and gold jewellery.
“Consumers tend to hoard gold coins and gold bars instead. The overseas sale of Malaysian gold jewellery is likely to be impacted,” he said.
According to Nambiar, the Fed would likely maintain a quarter basis point hike in the final quarter of 2023 to check inflation.
On March 22, the Fed raised the interest rate by a quarter basis point, inaugurating a new benchmark borrowing rate of 4.75% to 5%.
“There won’t be another rate hike till the fourth quarter of 2023. And it will likely be a quarter of a percentage point increase,” he said.
In the United States, he said interest rates will settle at around 5.25% by the end of 2023.
“Interest rates will peak at a new high level, but it won’t be strong enough to deter people from investing in gold as a hedge against inflation. Gold prices, therefore, will continue to rise this year.
“High-interest rates and the ongoing Russian-Ukraine conflict ensure the attraction of gold as a hedge against inflation. The Fed isn’t expected to slash rates until 2024,” he said.