As I write this, I’m on an American 777 returning home from Venice, after a fascinating trip to the September VicenzaOro fair. Vicenza is not nearly as large as JCK or Hong Kong, but it has its charms, and honestly, if you want to craft something in karat gold, there are no better sets of hands to do the job than Italian ones. Arezzo alone has some of the finest engineers on the planet, designing machines that can produce gold textures rivaling the finest silk, and they all show in Vicenza. And even if you don’t see anything amazing, there’s always the wine!
There’s an interesting annual circularity to the main global shows, as Vicenza in January sets the tone for new styling, Hong Kong in March tells you what the Chinese decided to knock off, and then JCK shows you what’s going to be promoted for Christmas. I marvel at American jewelers who say they’re not going to this or that show, because they don’t need to buy anything. Shows are not for buying. Shows are for discovering what’s next.
The talk of this show was, of course, tariffs. The Chinese have gotten used to the penalties, but the Indian manufacturing community is still completely freaked out. There’s no way to fix the Indian tariff situation until Putin suddenly does a 180 and decides to make peace with Ukraine, and as of this writing, that seems to be an event with a very low probability. What many Indian suppliers appear to have discovered is that if you make castings in the US and then send them to India, you can avoid a substantial portion of the tariff on the value of the domestic castings. And here’s the crazy part that no one acknowledges in public. There’s a pretty good chance that those castings being sent overseas just get melted, and what actually arrives in the US was made completely in India. Crazy, eh?
There was also a lot of talk about ascending gold prices. I started warning about increases in gold price back in May of 2024, and while some of you thought I was crazy to imagine gold over $3500, here we are. One might think that with gold prices this elevated, consumer demand would stall, but that hasn’t been the case, has it? And with M2 (total global money supply) now rocketing to new heights, but with recent pretty bad news on the employment front, we will finally get interest rate relief from the “Way Too Late” idiots at the Fed, essentially adding gasoline to a house fire, likely propelling the price of assets like bold, and bitcoin into the stratosphere.
Realize that we’ve had over 30 months of ISM (a measure of industrial purchasing activity) reports below 50, meaning that purchasing managers have had a negative view of the economy for two and a half years. The Fed cuts will now drive that number up too, and then get ready to watch the price of certain things enter the “Banana Zone”, that magical place where FOMO (fear of missing out) drives the value of all things investable through the roof in an exponential buying frenzy. As an investor, I’m psyched to participate in the “Blow Off Top”. I just hope I have the discipline to sell before the law of gravity kicks in. And who knows – maybe it won’t this time, as it’s pretty clear that the dollar is going to lose massive value with what’s going on. But what happens in your stores when you lose all the retail price points below a thousand dollars due to increases in the price of gold? Are we headed for a silver-based affordable jewelry economy? Perhaps.
The last time we had a price shock of this magnitude was in the early ‘80s, when gold increased in price by a factor of 5 in just three years, while simultaneously Japanese speculators bid up the price of one carat D/FL diamonds to sixty thousand dollars. Remember: when prices suddenly elevate, wholesalers have to take the additional markup on the elevated price, which sets the stage for even higher price levels. The resulting chaos caused the American jewelry manufacturing community to disintermediate their regional wholesale distributors en masse and go direct, eliminating parts of a supply chain that had existed for generations. It makes me wonder if we’ll see a replay this time.
Let’s just hope that consumers don’t suddenly lose their enthusiasm for luxury purchases like jewelry. And don’t forget – there are tens of thousands of young women who will now suddenly insist on getting engaged in the same year as Taylor Swift, and many who will also want an antique cut elongated cushion. The cutters have been slow to react, and I actually met with the owner of a huge lab company from Antwerp late in the afternoon of the first day who didn’t know a thing about this. I ran into him the following day, and discovered that his team doing a show simultaneously in Germany had received four requests for Taylor Swift cushions that same day. Yep, it’s a global thing, and it’s going to ring the cash registers of astute observers.
Be ready for this. In the past two generations, there has been only one other female celebrity with the cultural gravitas possessed by Taylor Swift: Lady Di. And as anyone who sold thousands of Lady Di sapphires surrounded by a halo of diamonds will tell you, that was a fun ride.
Class dismissed!
