This article only represents the author's own views.
Rising gold prices that can translate to higher sales as people hedge against economic uncertainties are providing a goldmine for some jewelry brands mining the capital market lately for IPOs. But those same rising prices also have a darker side, dampening demand for jewelry made using the increasingly expensive metal. Chow Sang Sang Holdings International Ltd. (0116.HK) is rapidly discovering the downside of sky-high gold prices, warning last week that its profit fell between 33.5% and 39.5% in the first half of the year to between HK$500 million ($64 million) and HK$550 million, reflecting strains the sector is feeling.
The company attributed the decline mainly to falling jewelry and watch sales due to record gold prices, as well as challenging economic conditions that have resulted in weak consumer spending. The company also blamed unrealized losses on mark-to-market revaluation of bullion loans for the period, compared to an unrealized gain last year.