Silver Jewelry Report

Prepared for The Silver Institute

December 2020
Silver Jewelry Report

Table of Contents

1. Summary 2
Introduction 2 Summary 2
Focus Box: Silver Jewelry’s Popularity 5

2. Global Jewelry Fabrication Outlook 2020-21 8

2020 Overview 8 2021 Forecast 9
Focus Box: Silver’s Use in Other Jewelry Alloys 10
Focus Box: Silver Jewelry’s Net Call on the Bullion Market 11

3. Country Analysis - United States 12

2020 Overview 12 2021 Forecast 12
The Longer-Term Outlook 13 Consumption Drivers 14
Focus Box: SPS Surveys Point to Strength & Future Potential 15

4. Country Analysis - India 16

2020 Overview 16 2021 Forecast 16
The Longer-Term Outlook 17 Consumption Drivers 18
Focus Box: Indian Silver Jewelry Designs 17

5. Country Analysis - Europe 19

2020 Overview 19 2021 Forecast 19
The Longer-Term Outlook 20 Consumption Drivers 20
Focus Box: European Silver Jewelry Designs 21

6. Country Analysis - East Asia 23

Introduction 23
Thailand: 2020 Overview 23 2021 Forecast 24
The Longer Term Outlook 24 Consumption Drivers 25
China: 2020 Overview 26 2021 Forecast 26
The Longer Term Outlook 27 Consumption Drivers 27
Focus Box: Thai Silver Jewelry Designs 24
Focus Box: Chinese Silver Jewelry Designs 27

Cover image: Rockstar Bracelet by E.L. Designs, courtesy of the Silver Promotion Service
Chapter 1: Summary Silver Jewelry Report

Chapter 1 Summary

– Global silver jewelry fabrication hit Introduction

record highs in 2015 and 2018, but has Silver jewelry fabrication is one of the bedrocks of the metal’s overall
since fallen noticeably. demand, accounting for around one-fifth of the global total. It can also be
resilient in the face of high silver prices and so is a more stable contributor
– In 2020, total offtake is estimated to drop to total demand than other areas such as physical investment. Furthermore,
by 46.6Moz (1,450t), to 153.6Moz (4,778t) there is clear potential for longer-term growth - our proprietary Silver Five
largely because of the effects of the Year Forecasting Quarterly shows silver jewelry accounting for around a
pandemic. quarter of total demand by the mid-2020s.

– The largest jewelery fabricator is India, Given this significance, The Silver Institute commissioned Metals Focus
by some margin, followed by Thailand, to produce an in-depth study of the global silver jewelry market to bring
China, Italy and then the US in fifth place. greater understanding to the opportunities and threats that exist in this
segment. The report pays particular attention to consumption in the
US, Europe, Thailand, China and India. (For those unfamiliar with Metals
Focus’ terminology, fabrication refers to where the jewelry is made, while
consumption refers to where the pieces are bought.)

This report provides a detailed update on 2020 and also Metals Focus’ near-
term forecasts for the global jewelry market. In terms of the analysis for this
year, given the unique circumstances that have affected demand across the
world, we first briefly review conditions in 2019. This offers both a view of a
more “normal” year and also gives a sense of how silver jewelry demand may
look once a meaningful recovery is underway.

Summary
The Scale of the Silver Jewelry Market
Last year, global silver jewelry fabrication reached an impressive 200.2Moz
(6,228t), up a full 26% on the low for the decade in 2012. There was a quick
recovery in many countries after that trough when the silver price fell, but
the robust growth after that was largely driven by India. That country’s
growth was in turn mainly due to rising disposable incomes plus supportive
structural factors (see Chapter 4 for further details). As explained in Chapter
2, this year has proved tough, with demand expected to fall by 23% due
to COVID damage. On a more positive note, we are forecasting a healthy
recovery next year of 13%.

Silver Jewelry’s Key Markets

India is by some margin the largest producer, accounting for 35% of total
fabrication in 2019 (and so up massively on the 13-14% seen in 2010-12).
That was not always the case as, basis our statistics starting in 2010, China
was the world’s largest fabricator until 2013. The current number two is
Thailand, whose strength rests on exports and being home to production for
key brands such as Pandora. Exports also explain the position of the fourth

2
Chapter 1: Summary Silver Jewelry Report

Top-5 Silver Jewelry Fabricators biggest globally, Italy. That just leaves the US to complete the top five, with
this group accounting for almost 80% of the global total in the last few years.
Moz US$/oz
180 40 In terms of consumption, the rankings change notably. India remains
160 number one, but the US moves up to become a clear number two, while
35
140 China is third. Italy, as a major exporter, and even more so Thailand fall down
120 30 the rankings. However, collectively Europe pulls back into a comfortable
100 third place, roughly 20% down on the US but 50% bigger than China.
25
80
60 20 We should note here that our figures for fabrication and consumption are
40 in terms of the fine weight of silver. If we looked at markets in terms of their
15
20 value, a radically different picture emerges due to the totally different
0 10 markups at the retail level on silver jewelry. In India for example, the markup
on traditional jewelry is usually as low as 10-15% and even so-called fashion
jewelry might only go as high as 40%. In contrast, Western silver jewelry
India Thailand sells on average at around 10 times the silver’s value (i.e. a 1,000% markup).
China Italy
US Silver Price This in turn reflects the higher design element, the frequent incorporation of
stones and the premium that branded goods attract. As a result, on a value
Source: Metals Focus, Bloomberg basis, the US silver jewelry market is easily the world’s largest at around
5-6 times the size of India. The latter might even struggle to beat Europe’s
largest, Germany. The gap between Europe and the US also narrows on a
value basis as branded goods have a higher market share in Europe. For
instance, Pandora is thought to account for roughly a quarter of French
sales, but is only just over 10% of the US total.

Key Countries’ Market Structures

As implied by the above noted variance in markups, the structure of the main
markets differs widely. In India, the mainstay of demand is traditional jewelry,
such as leg chains and toe rings. These low margin, relatively heavy pieces
are mainly sold in rural areas and are often bought with an investment motive
in mind. Their fineness is also variable, often fluctuating inversely to silver
prices. In contrast, urban India is seeing the rise of silver jewelry pieces
where adornment is the primary driver, where purity stands at 925 and which
are often sold in chain stores. However, the relative scale of this segment
remains far behind other countries.

In contrast, Western markets mainly comprise high margin, high design

branded pieces, often with stones being incorporated. The majority would
be sold through chain stores, although another distinguishing characteristic
is that these markets have the highest (and rapidly rising) share of sales
going through online channels. In the middle sits China, with the tier 1 cities
having silver jewelry markets structurally similar to other industrialized
countries, while its 3rd and 4th tier cities and its rural areas see more
traditional styles on offer. A key feature in terms of regional variations is that
consumers in some regions (mostly in the southwest, such as the provinces
of Yunnan and Guizhou) traditionally see silver as a symbol of good fortune.

A Comparison to Gold Jewelry Demand

There are three key overall differences between gold and silver jewelry
demand. First, silver’s is less volatile - in 2010-19, the year-on-year changes

3
Chapter 1: Summary Silver Jewelry Report

in demand averaged 5%, whereas those for gold jewelry averaged 9%. This
mostly reflects silver losing out to or taking market share from gold and the
base metals depending on precious metal prices. Second, gold jewelry is yet
more important to the overall gold market; jewelry accounted for just over
half of total fundamental demand during 2010-19, as opposed to silver’s
fifth. Thirdly, the geographic mix of importance differs. Western countries
accounted for around 45% of silver jewelry consumption in 2010-19, as
opposed to just 11% for gold. By contrast, the Middle East and China are
less important relatively for silver; these two accounted for 4% and 11%
respectively of the white metal’s jewelry fabrication in 2019, whereas the
comparable figures for gold were 13% and 32%.

A Review of the Key Drivers Behind Silver Jewelry Demand

1) The Silver Price

As already mentioned, the link between the silver price and jewelry demand
is complicated by the shift that some markets can see to / from gold and to
/ from jewelry in base metals. As such, a rally or decline in the silver price
may have a surprisingly modest impact globally on silver jewelry demand.
Furthermore, Western markets (and increasingly China) have sufficiently
high margins on jewelry that a move in the silver price only has a limited
impact. In fact, it has often proved only to become material when high silver
prices occur in conjunction with marked economic hardship and/or the
price moves are dramatic. One example of that was in the US when, during
the financial crisis of 2008/09, silver benefited at the expense of gold, with
gold-plated and gold-clad silver items growing in popularity. That said, some
countries, most obviously India (especially its rural demand), can prove
highly sensitive to moves in the silver price.

One point to make in this regard concerns the nature of the price move - if
prices are volatile, demand can often prove quiet until conditions become
more settled, something that can occur apparent in India. However, it can
feature in the industrialized world, should retailers and wholesalers show
caution. The rationale for all in a bear market is invariably why buy now
when prices will soon be less expensive? Conversely in a bull market, it is
common to hear that buying is held off until an expected price correction
has occurred.

2) GDP Growth
Logically, as a country grows richer, its jewelry consumption should rise.
This is what we have been seeing very clearly in India, where an added boost
to the fine weight bought has been consumers seeking higher purity jewelry.
However, the link can prove weak or even reverse if rising incomes occur
in tandem with structural change. This is most apparent in China, where
younger, wealthier consumers are switching to high design gemset pieces,
which will boost the value of sales but can undermine the fine weight.

Two other points are also worth making in regards to a link to the economic
situation. Firstly, if recent hardship and financial crises have created a belief
that gold in any form is a store of value, sales of gold jewelry in future years

4
Chapter 1: Summary Silver Jewelry Report

Silver Jewelry’s Popularity

The strength of silver jewelry demand compared to jewelry
Jewelry Fabrication’s Gold:SIlver Ratio*
demand for other metals varies hugely between countries. This is Over Time
mainly due to cultural attitudes, such as consumers viewing silver 8
as fashionable or a close, rather than a distant, relative of gold. 7
(This helps explain why silver jewelry in the US is much stronger
6
versus gold than it is in many other countries.) Similarly, some
5
markets might accept pieces made in base metals if the design
4
and branding are good enough (a common view in Europe), while
3
others would dismiss say a necklace in bronze as worthless.
2

As shown below, Indian silver jewelry demand versus gold today 1

is much stronger than silver is in China. This is due to both pro-

silver facets in India (such as urban areas’ preference for silver
for daily wear items) and pro-gold features in China (such as the Europe USA
effort that goes into R&D for 24-karat jewelry). In Europe, silver world excl India India
China
is typically stronger relatively in northern countries, but that is
mostly due to the strength of gold in southern Europe rather Source: Metals Focus. * silver jewelry fabrication / gold’s.
than silver being particularly weak. We have graphed fabrication
below, which does highlight a few apparent anomalies that grown strongly while gold has stagnated. This has been due to a
require explanation, mainly for the major exporters. The fact that variety of factors, including silver jewelry hitting the sweet spot
Malaysia is geared to gold jewelry exports and Thailand to silver in terms of price points as incomes rise (especially in rural areas),
jewelry exports (it is home to Pandora’s output) explains their and the urban youth’s view of silver as fashionable. China’s GSFR
respective divergent gold:silver fabrication ratios (GSFR) of 0.3 has also fallen slightly over time, due to intense marketing and
and 27.1 for 2019. Similarly, as Switzerland is home to many of the product development in gold, which has tended to push silver
top watch and jewelry brands and as they focus on gold, it too to third and fourth tier cities and rural locations. A final point to
has a very low GSFR. All three would have very different GSRs if make is that major swings in prices can, for a short period, move
shown on a consumption basis. GSFRs. For example, global gold jewelry demand grew more
strongly (+25%) than silver’s (+17%) in 2013 even though the
The importance of cultural factors is highlighted by GSFRs gold price fell by “only” 15% versus silver’s -24% as the yellow
tending to be fairly stable over time. As shown in the chart above, metal became sufficiently affordable for various countries’ mass
the obvious exception is India, where silver jewelry demand has markets.

Jewelry Fabrication’s Gold:Silver Ratio*

7

Source: Metals Focus. * silver jewelry fabrication divided by gold jewelry fabrication.

5
Silver Jewelry Report

can benefit. This has been seen of late in the US, where retailers cite this as
a driver of lower income groups purchases of plain gold basics, including
comparatively heavy chains. Secondly, if income gains skew to the younger
generation, silver benefits over gold, while the reverse is true if the gains
skew to older consumers.

3) Structural Changes in Jewelry Markets

A common theme post-WW2 in Western jewelry markets has been a shift
from plain, unbranded, simple designs to stone-set, branded high design
pieces. This has been most important to gold, but it has also benefited
silver. This process matters as it diverts expenditure from the fine metal to
other materials and to intangibles. However, the vast bulk of this change
has already occurred. For instance, stone-set silver, according to Société
5 (which surveys the French jewelry market), accounted for 57% of sales
(in unit terms) in both 2015 and 2019. In addition, the process could now
be proving positive due to the attraction to consumers of novelty made
possible by fancy designs and the push coming through from the brands’
advertising.

This shift has also been visible in China, and over a much shorter time frame.
The emergence of positives here is also encouraging; consumers have
responded to novel collections featured with popular licensed designs,
cultural elements and greater use of alternative materials (such as enamel or
cubic zirconia). In the case of India, the shift to pieces similar in style to that
on offer in industrialized countries has been slower, but it has seen its own
structural shifts, namely a move to higher purities and the emergence of 925
jewelry as desirable items for daily wear.

The other major structural change has been the revolution in retailing
(especially in Western markets), namely a shift from independents to chain
stores and from bricks & mortar to online. The former is thought to have
had little impact overall on silver, while the latter is seen as positive as
silver jewelry’s price points work well in an online space. It is worth noting,
however, that corporate-level decisions by retailers in certain countries can
have a visible impact. Examples here includes “big box” retailers in the US
pulling out of or scaling down their fine jewelry offerings and all bar one of
the French hypermarkets essentially pulling out of fine jewelry.

Silver Jewelry’s Longer Term Outlook

As set out in Chapter 2, we expect next year to show a partial recovery as
high silver prices limit post-COVID gains. A similar result could be seen in
2022 as the benefits of further improvements in the global economy and
consumer sentiment are partially offset by still high silver prices and the fact
that any wave of pent-up buying will have largely passed. As a result, it may
not be until 2023 that global jewelry demand returns to pre-COVID levels as
potentially somewhat lower prices finally allow demand in price-sensitive
countries (especially India) to flourish. Beyond then, further gains are also
forecast, with successive record highs likely. Importantly, these increases
could well be larger if sales are measured in value terms as average markups
rise ever higher due to structural change within markets.

6
Silver Jewelry Report

We are not expecting much regional variation in the outlook for jewelry.
However, emerging markets should slightly outpace the industrialized world
as the former should enjoy faster GDP growth and should benefit more
from our forecast of lower silver prices in the mid-2020s than now. It is also
possible that those producing exports in competition with China outperform
the latter as it faces a rising cost base and potential tariff increases.

Silver Jewelry’s Comparative Advantages & Threats

Any discussion of silver jewelry’s advantages and threats is best treated on
a regional basis as sales in the industrialized world behave very differently to
those in lower income countries.

In the industrialized world, silver jewelry is well suited to several key broad
trends that markets here are seeing. These include:

a) the rise of self-purchase (as opposed to gifting)

b) a shift to branded goods
c) a swing from the occasional purchase of high ticket items to the more
frequent purchase of lower ticket items
d) market bifurcation (whereby the top and bottom ends outperform the
mid-market)
e) the swing from bricks & mortar to online selling
f) structural gains for men’s jewelry

However, there are others that have the potential to undermine silver jewelry
sales, such as younger consumers choosing experiences over material
goods and the far greater promotion of non-jewelry areas, in particular tech
goods and services, and travel. Furthermore, the strength of brands may be
sufficient for consumers to opt for non-precious jewelry (especially men’s).
Lastly, silver enjoys little of the quasi-investment appeal that plain gold
basics have (especially in the US).

Much of the above could apply to consumers in China’s top cities, although
the threat from non-precious alternatives is seen as weak, while the
potential for brands to push sales is seen as high due to their ability to
promote innovative designs. Urban India will also see some of the above
trends, although the threat from rival consumer goods and services is
expected to be particularly strong. In some ways, the threat with the most
potential for emerging markets is structural change as this can undermine
the fine weight that is bought while at the same time lifting the value of sales.
That said, structural change need not be uniformly negative. If for example,
rural Indian consumption were to upgrade to a 925 purity as incomes rise,
that would benefit the fine weight of silver jewelry being sold.

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Chapter 2: Global Jewelry Fabrication Outlook 2020-21 Silver Jewelry Report

Chapter 2 Global Jewelry Fabrication

Outlook 2020-21
– Silver jewelry fabrication in 2020 is 2020 Overview
expected to see a 23% fall due primarily This year has been one of the toughest in silver jewelry’s history, with global
to the physical restrictions, damage to demand forecast to fall by 23%. The weakness was most acute in April with
sentiment and economic harm caused by the months either side still very difficult. For example, US sales of all jewelry
the COVID pandemic. and watches fell by 21% y/y in March, 51% in April and 27% in May (basis US
Department of Commerce figures). Sales in some markets have recovered
– Demand is forecast to grow in 2021, by to sales at flat year-on-year or even slightly up, but no market looks to be
13% as firmer GDP growth offsets the seeing a rebound in the second half strong enough to offset first half losses.
impact of high silver prices (especially in
India), potentially leaving 2021 13% down This performance during 2020 has, unsurprisingly, been overwhelmingly
on 2019’s pre-COVID level. driven by the extent to which COVID has impacted global jewelry markets
and the ways in which it has done so. In comparison, our forecast 27%
– Silver jewelry fabrication net of old rise in the average price this year is of secondary importance. By way of
jewelry scrap is forecast to fall by a illustration, this year’s decline for jewelry of 23% is far larger than the 7%
slightly steeper 25% this year. drop for 2011 when the silver price rose a far more dramatic 74%.

Much of the damage from COVID was due to the physical restrictions
imposed on consumers due to shelter-at-home orders and the closure of
retailers. Some recompense came from a surge in online buying, but this
sector was too small in most markets (especially India) to ever offer the
chance of full replacement. In comparison, the physical restrictions on
the jewelry trade and producers were secondary as most markets saw no
reports of consumers being unable to buy because of an absence of product
(a phenomenon that greatly affected the sale of bars and coins).

On top of their ability to buy, the consumers’ mood is worth mentioning.

First, even if they were able to visit shops, many were reluctant to do so on
health grounds (a clear reported feature of buying in the major US cities
for example). Second, consumers frequently displayed less desire to buy,
especially early on, as there were far fewer social events to attend that
would previously have acted as a prompt to acquire a new item of jewelry.
Even if consumers had wanted to buy, many were unable to do so because
of a loss of income or they were reluctant to buy, fearing a future loss of
earnings (this looks to have been critical in explaining weakness in India). A
rise in household savings rates in many countries was also a factor.

The distinctions between restrictions, sentiment and incomes are important

to make as they will impact any recovery. The actual ability to shop for
instance helps explain dramatic swings such as sales in France of non-
gold jewelry, according to Société 5, being 53% down y/y in May but up
24% in June (in terms of number of units). There is of course every chance
that, once the wave of unleashed buying has passed, sales become more
ordinary - as clearly hinted by French non-gold jewelry sales in July dipping
by 8%. The impact of sentiment can also be seen in the UK hallmarking; this
was down by 53% in July and by a still hefty 40% in August, with the gulf
versus the rest of Europe often ascribed to consumers’ Brexit-driven nerves.
Another development worth noting is that the fabrication of silver jewelry

8
Chapter 2: Global Jewelry Fabrication Outlook 2020-21 Silver Jewelry Report

Global Silver Jewelry Fabrication so far this year has fared far worse than its consumption. This is the result
of most retailers allowing stocks to run down, fearful of what may be around
the corner. For example, US jewelry fabrication is expected to slide by over
Moz
15% in 2020, whereas the drop for the country’s consumption (in weight
210
terms) should be around 10%. This has a further knock on impact on the
180 global bullion market, as countries’ imports of the metal to fabricate jewelry
150 will often have suffered even more. For instance, Indian silver bullion imports
so far this year (to end-October) are down by around 60%, even though
120
fabrication is forecast to fall by “only” 25%.
90

60 For both bullion imports and fabrication, the corollary of low stocks along
30 the supply pipeline is that, looking ahead, the recovery in these two

0 segments should exceed the growth in jewelry consumption. This looks to

2010 2012 2014 2016 2018 2020 be the case for the US as some exporters to that country are seeing a major
surge in shipments in the last month or so. The majority of this refilling of the
China India Thailand Italy Others
pipeline should feature in most countries in the coming months but is highly
likely to apply to early 2021 as well.
Source: Metals Focus

Not all countries are looking at similar performances in 2020 but the range
of outcomes is not that wide. For instance, essentially all countries are
expected to see fabrication suffer double-digit losses this year but most
of the majors are looking at losses of 15-20%, while the worst performers
(India and Thailand) may only see modestly greater declines of 25%. This
stands in contrast to gold, where far more divergent results are expected
(the good performers are looking at losses of 10-15%, while the weakest
are facing losses of 40-50%. One important driver of this divergence is that
silver consumption is skewed to Western countries and their governments’
stimulus measures, plus silver’s affordability, will support imports from
fabricators in emerging markets. A second factor is that silver’s affordabilty
will support its consumption in those same emerging markets.

2021 Forecast
After this year’s expected fall in global silver jewelry fabrication, we are
forecasting growth of 13% in 2021, helped by the above-noted contribution
from re-stocking. In some ways a comparison against a pre-COVID year is
more revealing, with our global figure for 2021 down 13% on 2019.

A key driver of the global figure’s modest rise in 2021 is our forecast rally in
the silver price (to an annual average in the high $20s). The significance of
this is highlighted by Indian demand. Although this is expected to improve
it will still remain well below 2018’s record high level. Western fabrication
(with its insulation of high margins) could also see a bounce back sufficient
to leave offtake only 4% down on 2019. We are also forecasting a strong rally
in gold prices and this will generate some substitution to silver, especially
in lower income countries. However, the benefits of this should not be
exaggerated. Firstly, gold jewelry in emerging markets, where pieces are
often bought as much for investment motives could even see stronger
gains than silver does (especially where the 2020 base was far lower).
Furthermore, the silver jewelry market in most Western countries is viewed

9
Chapter 2: Global Jewelry Fabrication Outlook 2020-21 Silver Jewelry Report

as operating quite separately from gold and so consumers will not switch
between the two on price moves of the magnitude we are expecting. Lastly,
some markets will also see silver lose out to pieces in base metals (such as
bronze or steel).

The second main driver of the modest scale of the 2021 recovery is again
COVID-related, namely the heavy and lingering economic damage caused
by the pandemic. This helps explains why our 5-year forecast shows most
countries only surpassing 2019 levels in 2023. A slight exception here is fast
recovering China; its silver demand could be back to 2019 levels by 2022.

It is of note that China achieves this despite structural changes (such as

gold’s superior product development record) are undermining its silver
sector. At the same time, changes in India (such as consumers seeking
higher purity silver jewelry) are generally supportive. Structural change
in the West (including a swing to branded) also have the potential to be
supportive. However, all these are more long term in nature and so will do
little to assist offtake in 2021.

Silver’s Use in Other Jewelry Alloys

Silver’s use in jewelry is not restricted to the ‘headline’ silver gold therefore as a share of total silver jewelry fabrication
jewelry fabrication number as it can form part of the master alloy is thought to be a little under 2%. However, as China (and
(the rest of the alloy other than the gold, platinum or palladium others) continue to move away from the very high karatages,
content). No silver is used in 24k gold jewelry and only trivial silver use in gold jewelry alloys has the potential to grow
amounts are used in 22k and 21k; it is in 18k and below where notably.
volumes become noticeable. In many markets, the lowest
percentage share for silver is in 18k rose gold. However, silver Silver’s use in platinum jewelry is minimal as, in the main
use can be even lower in nickel-containing white gold (where only Pt950 category, much of the rest of the alloy is base metals
small amounts of silver are added to improve workability). It is (typically copper), there is only 50/1,000 of the alloy to fill and
highest in items of 10k and below, where more of the total piece platinum jewelry demand is far smaller than gold’s. The filler
is master alloy than fine gold. For the production of jewelry that is in the Pt600 niche has typically been palladium but newer
18k or lower, typical average silver use equals a little over 10% of forms of the alloy can contain silver, although the absolute
the fine gold volume. The overall picture is opaque but silver-in- volume of silver ever required should be extremely modest.

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Chapter 2: Global Jewelry Fabrication Outlook 2020-21 Silver Jewelry Report

Silver Jewelry’s Net Call on the Bullion Market

If you were a mining company, it is silver jewelry’s net call on the reached should stay well below those seen in the early
bullion market that is potentially of great interest. By “net call”, 2010s. At the same time, we are confident that gross silver
we mean jewelry fabrication less the recycling of old jewelry (this jewelry demand will recover over the next few years, despite
excludes process/production scrap). As shown in the chart below, high silver prices initially affecting the price-sensitive Indian
silver jewelry’s net demand has risen more strongly than has the market. As a result, we expect both gross and net jewelry
headline number. To be precise, from a low in 2011, net demand demand to establish record highs in a few years’ time.
by 2019 had grown by an impressive 51%, whereas jewelry
fabrication on a gross basis had increased by a less heady 23%.
This year however, net fabrication is expected to fall by 25% and
so by a little more than the gross decline of 23%.
Gross & Net Silver Jewelry Demand
Looking at the chart in more detail, the comparatively flat nature of Moz
silver jewelry recycling may be surprising. A key reason for this is 210
that much of silver jewelry’s sales are in Western countries, where
180
high markups and low prices per piece mean consumers are
much less motivated to sell old silver than they might gold jewelry. 150
In fact, it is quite common for scrap from Western countries to 120
come overwhelmingly from the recycling of slow selling stocks by
90
manufacturers and/or distributors, rather than from consumers.
A second is that in India (the world’s largest single silver jewelry 60
market in weight terms) consumers rarely sell back old jewelry.
30
This is primarily due to the financial losses likely to be incurred,
which in turn stem partly from the low purity of many items. 0
2010 2012 2014 2016 2018 2020
Jewelry fabrication Recycling
Looking ahead, we forecast that global jewelry scrap will see a
notable gain in 2021 and stay high in 2022 due to expectations of Net demand
Source: Metals Focus
a bull market in those years for silver prices. However, the levels

11
Chapter 3: Country Analysis - United States Silver Jewelry Report

Chapter 3 United States

– US silver jewelry consumption is forecast 2020 Overview

to fall 10% this year as the recovery from
the April lows only partially compensates Any review of the US silver jewelry market in 2020 is inevitably dominated
for heavy March-May losses. by the depth of the trough as the COVID pandemic took hold and then the
speed of the recovery as lockdowns were eased and the economy came
– Jewelery demand in 2021 is expected to back to life. In this regard, we can point to the data from the US Department
rise by 10% as economic life returns to of Commerce on sales (by value) of all jewelry and watches. This shows a
near normal. dramatic slump to losses of -51% y/y in April and a strong recovery to +2% in
June (making for an indicative -25% for Q2 as a whole).
– Steady consumption gains are forecast
beyond 2021 (especially in value terms), Our contacts inform us, however, that recent sales include an element of
although competition from rival goods pent-up demand, as more consumers are at last able to leave their homes,
mean slower growth for silver than the and so called “revenge shopping” (the latter being shopping as remedy to
expected rise in consumer spending. the general gloom of recent months). As a result, it is far from guaranteed
that the modest gain seen in June continues. This would be doubly certain
if infection rates fail to fall materially, if unemployment were to rise and
consumer sentiment to falter as furlough schemes and other forms of
government support are unwound. We can neither ignore the US presidential
election, which traditionally puts a brake on sales of discretionary goods due
to uncertainty surrounding the outcome.

The above refers to the whole jewelry market and so it is important to look
at silver in isolation. So far, information from trade contacts suggests that
silver has fared slightly worse than gold among retailers with a fair offering
of both due to the ongoing popularity of the “yellow look”. Specialty and
independents have also tended to see greater sales losses than generalist
retailers who include jewelry in their product range. As the former two tend
to have a greater skew to silver, this may have also acted as a drag on silver
sales. For instance, Pandora saw losses in Q2.20 of 35% y/y. That said,
Change in US Jewelry & Watch imports of silver jewelry have fared better than gold, with a year-to-date (to
Sales end-July) drop of 25% in comparison to gold’s -38%.

10 As a result, we expect US silver jewelry consumption in 2020 to fall by

0 10%. While steep, that is smaller than the 16% decline we expect for the
fabrication of silver jewelry (and a larger fall in silver jewelry imports) as
-10 the year has been characterized by heavy destocking and only cautious

-20 inventory replacement as retailing comes back to life. The greatest

contrast, however, is with expectations at the start of the year; then we were
-30 expecting the US silver jewelry market to grow by 2%, largely as the drag of

-40 previous years’ substitution to gold faded.

-50 2021 Forecast

-60 We currently forecast that silver jewelry (both consumption and fabrication)
will enjoy a double-digit year-on-year rise in 2021 but the levels attained will
fall just shy of those in 2019. That sales improve on this year is chiefly down
Source: US Department of Commerce
to an ongoing recovery in consumer spending and shoppers feeling more

12
Chapter 3: Country Analysis - United States Silver Jewelry Report

US Silver Jewelry Fabrication comfortable in venturing out to stores. Jewelry could further benefit from
consumers’ growing willingness to spend on discretionary goods and more
Moz
social occasions for which a new item of jewelry is desirable.
16

14 That silver fails to re-attain pre-COVID volumes we see as down to still

12
high unemployment, a desire to build savings, higher silver prices and a
possible drag from substitution. It is possible that record gold prices will
10
force some consumers to switch to similar pieces in silver, as occurred in
8 the early 2010s. However, trade sources typically feel that trends in market
6 segmentation mean the number of consumers open to both metals is

4 smaller than a decade ago. At the same time, losses to costume jewelry
could easily be greater than the wins from gold. However, the currently poor
2
showing of some costume jewelry brands leads us to think that the scale of
0 this switching could also prove small. Instead, we may just see those seeking
silver jewelry opting for lighter variants of the sort of item envisaged.
Source: Metals Focus
Fabrication (and imports) in turn could show stronger rises than
consumption as the jewelry supply chain returns to more normal levels of
stocks. However, a still cautious approach to inventory levels means this
differential may prove small. In addition, we are likely to see a continuation
of a trend in recent years whereby retailers, and not just those exclusively
online, hold lower levels of stocks and merely pass the consumer’s order
direct to the jewelry producer, wholesaler and/or importer.

The above trend to lighter (and so higher margin) pieces, on top of the
higher silver price itself, is a key reason as to why the value of sales could
outperform the fine weight sold. That would also be reinforced by the revival
of sales next year at independents and specialty stores, whose average
prices tend to be higher than for generalist retailers. Furthermore, the raft of
innovative designs being launched by various silver jewelry brands should
assist proportionately more in the raising of the value of sales.

The Longer Term Outlook

Our current outlook for the silver jewelry market in the years beyond
2021 is for steady growth to emerge. Sales will certainly be helped by the
resumption of steadier economic growth. There are also certain structural
factors within jewelry (such as the growing share of consumption going to
self-purchase) that should favor silver. However, we need to acknowledge
others (such as consumers’ belief that gold is a good store of value)
that will undermine silver. Outside of jewelry, it would also not surprise if
other consumer categories continue to take a greater share of consumer
spending.

As a result, it is possible that consumption by the mid-2020s will have just

managed to attain record levels. We see little reason for fabrication and
import totals to perform differently. However, the mix of origins for imports
could change considerably as inflows from China give way to other low cost
producers, such as Indonesia. Once more, we would also expect the value of
sales to outpace the fine weight, even with the silver price falling back, due
to the ongoing shift to more branded and gemset items.

13
Chapter 3: Country Analysis - United States Silver Jewelry Report

US Silver Jewelry Imports in 2019 Consumption Drivers

US$m
Silver Prices
500 The price of silver has a comparatively small net impact on US silver
jewelry sales. On top of high margins, large moves in silver prices invariably
400 accompany changes in the gold price and so substitution between the
two can occur on the basis of affordability. As noted earlier, some industry
300 sources believe this to have weakened over the last decade, mainly because
of changes in the gold market. That saw strong growth in recent years as
200 sales of plain gold basics performed well among lower income groups who
had been impressed by gold jewelry’s ability to act as a store of value – as
100 witnessed by the earlier boom in cash-for-gold. At the same time, there
is said to have been clear sales growth for innovative silver designs, with
0 higher margins and more stones, that appeal to millennials. As a result, gold
and silver have increasingly come to operate in two separate spaces.

Source: IHS Markit Economic developments

Outside of a rule of thumb that higher incomes should translate into higher
jewelry sales, one trend to monitor is income growth by quintile and age
bracket. This matters as silver can be expected to outperform other
segments of the jewelry market if income gains skew to younger middle
income groups. Similarly, if gains skew to lower income, older or non-white
groups, plain gold basics should outperform. This would do wonders for the
fine weight if less so the value of sales. If, on the other hand, income gains
skew to the top few percent, branded, heavily gemset pieces will outperform,
boosting the value of sales but barely moving the fine weight. Here, most of
the benefits in metal terms would accrue to gold and platinum.

Structural changes to product offerings

Most Western markets have seen a swing over recent decades from plain,
simple pieces to higher design gemset items. That is thought to apply less in
the US to gold, but this still has relevance for silver. After all, the phenomenal
growth that Pandora has enjoyed was based on small, high design, invariably
gemset pieces that in turn imply high margins. More recently while Pandora’s
star has faded somewhat, there are reports of dynamic independents and
manufacturers doing good business in high design products that appeal to
millennials on the grounds of a good “story” in terms of ethical standards.
We would not be surprised if this trend were to continue.

Competitive advantages and threats

There has been a clear rise in market share for self-purchase (typically
by women) as opposed to gifting (where purchases are more likely to be
made by men). This is said to have altered the market to the more frequent
purchase of items with a lower ticket price, and this is felt to have benefited
silver more. At the same time, there have been ongoing gains for online’s
share of jewelry sales and this is again felt to have helped silver more due to
lower sticker prices working better on line.

A clear positive that silver enjoys in the US it is that the metal has a higher
status than in many other countries and is therefore closer to gold than

14
Chapter 3: Country Analysis - United States Silver Jewelry Report

to the base metals in desirability. An illustration of this is that a brand as

prestigious as Tiffany & Co. has a decent offering in sterling silver - a position
that many of the top end European brands would not consider. This is felt to
be an engrained feature of the US market and so no change is expected.

A clearer negative for silver is the ongoing heavy promotion of other

categories of consumer goods and their resulting market share gain. Tech
goods for example can demonstrate innovation in a way that jewelry cannot,
while luxury accessories for instance can display a brand more easily than
jewelry. There has also been a clear trend among younger consumers away
from goods to experiences, harming jewelry. This can only be reinforced in
the next year or so as tourism begins to recover as COVID fades.

SPS Surveys Point to Strength & Future Potential

Leading Designers’ New Ranges
The Silver Institute’s Silver Promotion Service (SPS) has been conducting a
market measurement survey now for 11 years, focusing on the independent
sector in the US. The survey provides valuable insights into the structure
of silver sales. For example, pieces in a $100-$500 range are the largest
category with a 48% share, while sub-$100 pieces make up much of the rest
with a 46% share. Also, 63% of items are bought by 20-40 year olds.

Looking ahead, confidence in the future was apparent in that 54% of

respondents increased their inventory, and they did so by 18% on average.
Furthermore, over 90% were expecting strong sales growth to continue
in the next few years. Such optimism has understandably been undone by
COVID and, as noted earlier in this chapter, we expect to see a decline in
consumption of around 10% this year on a fine weight basis.

That outcome rests upon a decent rebound by year-end and so it was

interesting to see that view corroborated by a separate SPS study. This
found that 64% of respondents planned to purchase jewelry that they had
been unable to under lockdown and that 78% planned to purchase 1-4 items
of jewelry in the next six months.

As ever, silver jewelry will need promotion for the segment to stay buoyant
and so it is encouraging to see SPS’ launch of a “Virtual Silver Pavilion“ and
a “Holiday Pavilion”. These efforts showcase pieces by leading designers
of silver jewelry, as illustrated left. Such measures may only partially
compensate for the absence of live trade shows but without doubt they will
help lay the foundations for a 2021 recovery.

Legend: top - E. L. Designs’ Rockstar sterling silver

cuff; middle - Frederic Duclos’ sterling “circle”
earrings; bottom - Joryel Vera’s sterling cuff.

Source: Silver Promotion Service (savorsilver.com)

15
Chapter 4: Country Analysis - India Silver Jewelry Report

Chapter 4 India

– Indian silver jewelry fabrication enjoyed 2020 Overview

the most dramatic gains globally, rising
by 47Moz (1,390t) between 2010-19. In keeping with many other countries, the pandemic has severely impacted
India, which saw a two-month long nationwide lockdown (March-May) and
– This year, demand will fall to a seven-year regional restrictions thereafter until July. Combined with rising infection
low, driven by economic weakness, high rates and the ensuing economic slump, the country witnessed widespread
silver prices and the pandemic. However, job losses, especially in urban India, which was the worst affected by
2021 is forecast to see a strong recovery. COVID-19. For instance, according to the Centre of Monitoring Indian
Economy (CMIE), an estimated 6.6 million white collar, professional jobs were
– The outlook further ahead looks lost from May to August. Economic uncertainty and the impact on consumer
promising, given the expected rise in sentiment invariably led to a cutback in consumption, with India’s GDP falling
disposable incomes, the growth in online 23.9% y/y in Q2.2020, the sharpest fall over the last four decades.
sales and the ongoing shift in favor of
sterling silver pieces. Against this backdrop, silver demand has also suffered noticeably, with
bullion imports falling by 60% y/y over the first ten months of this year.
Focusing on silver jewelry demand, while we have seen a notable year-
on-year decline in H1.20, the losses have been less severe compared to
the slump in gold demand. This reflects the former’s lower retail price
point (which makes it more affordable to a large swathe of the population)
and its jewelry consumption profile which is dominated by rural India.
In that context, India’s rural economy has outperformed urban centers
as agricultural activity was termed essential and so continued almost
unhindered during the lockdown. Furthermore, while the virus has now
slowly spread to many rural communities, infection rates appear to remain
far below those seen in large cities.

Importantly, agricultural incomes are set to grow because of record sowing

of Kharif crops (monsoon crop) on the back of above normal rainfall and
an increase in the government’s minimum support prices (MSPs). This
underpins our expectation of silver demand outperforming gold this year.
Indian Silver Jewelry Fabrication
Moz Our trade discussions suggest that some pent-up demand emerged
during June and July after restrictions were eased. Silver demand has also
80
benefited from the proliferation of sterling silver jewelry and online retailing,
70
especially at a time when gold prices have jumped to record highs. That said,
60
as discretionary spending remains weak and as weddings are postponed/
50
canceled (due to restrictions on public gatherings), silver jewelry demand
40
is likely to remain subdued in absolute terms. Crucially, given the price
30
sensitivity of rural consumers, silver’s rally to a record high in August and
20 subsequent high volatility has also deterred some consumers. As such, we
10 expect silver jewelry demand to fall by 35% this year to a multi-year low.
0

2021 Forecast
Looking ahead to 2021, we expect to see a healthy double-digit gain
although that is set against 2020’s low level. The forecast upside for silver
Source: Metals Focus
jewelry demand next year will likely be constrained by our expectation of yet

16
Chapter 4: Country Analysis - India Silver Jewelry Report

Indian Silver Jewelry Designs

Silver Ring Silver Pendant

by by
Waman Hari Pethe Waman Hari Pethe
Jewellers Jewellers

Studded Silver
Earrings Silver Studs
by by
Waman Hari Pethe Waman Hari Pether
Jewellers Jewellers

Tradtional Payals
(Anklets)
by
Emerald Jewel
Industry

higher silver prices. Furthermore, the anticipated economic recovery may

be pushed further out as the pandemic could take longer to be meaningfully
controlled in India. This in turn could, to some extent, weigh on consumer
sentiment next year.

The Longer Term Outlook

As mentioned earlier, silver jewelry sales are dominated by price-sensitive
rural India and record high rupee prices are likely to weigh on demand in
2021. To offset the impact of this, jewelry fabricators and especially those in
the largest segment that focuses on traditional jewelry (such as leg chains
and toe rings) will likely choose to reduce purity or promote lighter pieces,
thereby reducing silver demand in weight terms. To an extent, the ongoing
shift towards sterling silver jewelry and the rise of organized retailing will
help offset this decline, but that is unlikely to lift silver demand materially.

17
Chapter 4: Country Analysis - India Silver Jewelry Report

Indian Silver Jewelry Exports Beyond 2021, as economic recovery achieves a firmer footing, rising
consumer confidence will help boost silver jewelry demand in India. In
addition to this, increasing awareness of sterling silver should benefit.
$ bn
An early, yet, interesting trend is emerging in urban India where young
5
consumers are choosing to buy gold plated fashion silver jewelry rather
than plain gold jewelry which is relatively inexpensive and allows them to
4
replace pieces more frequently. Our discussions with several key jewelers
revealed that millennials are more inclined towards the “look and feel” of the
3
jewelry piece rather than its traditional significance, which should benefit the
sterling silver and fashion jewelry segments.
2

Consumption Drivers
1

Silver Prices
0
2010 2012 2014 2016 2018 As explained earlier, India is a price-sensitive market and so large, frequent
price moves can affect jewelry sales. Evidence suggests consumers also
Source: IHS Markit tend to take longer to adjust following a period of high price volatility. For
instance, following silver’s rally in 2011 and the subsequent correction,
jewelry demand only started to recover from 2013 onwards. Importantly,
India’s gold and silver markets are quite separate, which means there has
been very little price driven substitution historically. While some substitution
may occur over the longer-term if gold prices remain high, it will still
represent only a small fraction of the overall market.

Economic developments
Rising disposable incomes and increasing urbanization have had a positive
impact on Indian silver demand. As economic growth recovered after
the 2013 slowdown, the positive spillover for silver jewelry demand was
palpable. While stable and low silver prices also contributed to the rise, silver
jewelry fabrication more than doubled between 2013 and 2018. However, as
economic growth slowed from 2019 onwards, silver demand also started to
ease back. In terms of some of the key jewelry segments, the growth in rural
Indian Silver Jewelry Exports: incomes tends to positively impact traditional jewelry demand while rising

Top Five Destinations urbanization benefits fashion and sterling silver jewelry.

1%
Structural changes to product offerings
3%
9% The only visible structural change has been the shift towards higher
4% purity sterling silver. This has also led to the ongoing ‘premiumization’ of
silver jewelry and, combined with modern everyday wear designs, this is
increasingly likely to attract the younger generation.

56%
27% Competitive advantages and threats
The digital boom in India, helped by growing internet penetration, has
benefited online jewelry sales, which is likely to favor silver (more so than
gold in our view) given its relatively low price point. That said, there is a clear
trend among younger consumers whose disposable incomes are being

Hong Kong United States spent on consumer electronics, such as cell phones and overseas holidays,
United Kingdom United Arab Emirates which can act as a negative for jewelry.
Germany Rest of the World

Source: IHS Markit

18
Chapter 5: Country Analysis - Europe Silver Jewelry Report

Chapter 5 Europe

– European silver jewelry fabrication is 2020 Overview

expected to fall by 17% in 2020 due to
COVID damage, with most countries Silver jewelry fabrication in Europe faced a challenging first half due to
seeing similar losses in consumption COVID. Regional consumption slumped and de-stocking along the retail
terms. chain was also the norm. In addition, as offtake is dominated by Italy
(accounting for around two-thirds of the total), results were hit by that
– Demand should bounce back next year, country’s total shutdown from March 9th to May 4th. As restrictions were
although volumes may have to wait until eased, output began to recover, but this looks to have been a slow process,
at least 2022 for a return to pre-COVID with some sources feeling that a return to output being flat year-on-year
levels. would only have occurred in July for a few and for a clear majority not
until September. Part reason for this is the dire straits of exports to global
– Longer term gains, especially in fine wholesaling hubs as these have yet to receive trade visitors in any number.
weight terms, may prove limited, unless For example, Italian shipments of silver jewelry to Hong Kong, Dubai and
clear brand-led promotion materializes. Panama in H1.20 in weight terms were down a respective 43%, 49% and 73%
y/y.

As a result, we are forecasting that European fabrication will see a 17%

drop for calendar 2020, chiefly due to still weak local consumption, limited
re-stocking of a bare supply pipeline and sluggish exports, especially to the
wholesaling hubs.

From a consumption perspective, there has again been a notable recovery

from the April lows, but the speed and nature of the improvement is
very mixed. The UK for instance remains very weak, with hallmarking in
September down 17% y/y. That is a clear improvement on April’s -94%, but
the cumulative total to end-September is off 43%. At the other end of the
spectrum, data from Société 5 points to silver jewelry sales in June having
grown by just over 20% y/y and so marking a very different bounce back
from losses in excess of 90% in April. That, however, still leaves France down
over 20% in the first half. Of the majors, Germany appears to be the best
performing. Sales there by Pandora in Q2 were down by only 6% y/y versus
UK Silver Hallmarking y/y Change
-21% for France. Germany’s import story is complicated by it being home
0% to Pandora’s pan-European distribution center, but our analysis suggests a
drop of 7% y/y in H1 imports for sale into the German domestic market.
-20%
Most European countries look to be on track to see double-digit losses for
-40% the full year for a variety of reasons. Firstly, the second wave of COVID has
hit prospects for economic recovery and secondly several countries are in
-60% line to see a winding back of government support schemes. Thirdly, the good
news that we have seen over the summer in some markets (for example

-80% France) is largely thought to represent pent-up sales, and a slide back to
sluggish conditions is seen as more likely than continued exuberance.

-100%
2021 Forecast
Our forecast for next year’s jewelry fabrication in Europe is a healthy

Source: Birmingham Assay Office rebound of 14% as retailers re-build stocks (perhaps still cautiously) and

19
Chapter 5: Country Analysis - Europe Silver Jewelry Report

Italian Silver Jewelry Exports, y/y as consumption in most markets returns to near normal after this year’s
shock results. This should apply to markets within Europe and those outside,
20% mainly supplied by Italy. Shipments to the wholesaling hubs may still be
sluggish if trade buyers are still not traveling, and some extra-European
0%
markets will be hit by the higher forecast silver prices. Both these explain
why we do not see an immediate return to pre-COVID levels next year.
-20%

-40% Consumption within Europe next year could be affected by higher silver
prices, but this is not thought likely to prove too damaging; on top of still
-60% high margins, substitution down from gold (mainly in northern Europe)
could provide some comfort and trade contacts feel that the threat below
-80%
from steel and brass may not prove that strong due to consumers losing
interest in both. Instead, healthier economies and fewer COVID restrictions
-100%
mean robust gains are likely. Some structural forces (such as the rise of
self-purchase) should also help, and we may see a lift from Pandora as the
challenges it is felt to have faced in the last year or so fade. This company
Source: Metals Focus, IHS Markit is worth commenting upon in isolation because of its substantial presence
– our calculations show for instance that it accounts for around a quarter of
the French market and its share in Italy is yet higher, perhaps over a third.

The Longer Term Outlook

Beyond 2021’s bounce back, modest consumption gains could emerge,
although we expect them to be smaller than in the US due to a belief that
Europe’s economies will prove more sluggish in the next few years due to
such factors as aging populations (especially in eastern Europe) and Brexit
turmoil. The value of sales, however, should outpace the fine weight sold due
to its growing skew to branded items and the return of long haul tourists.
The latter’s typical purchase is of higher value items than locals, although far
more of this advantage will accrue to gold, platinum and watches.

Slightly stronger gains are forecast for European fabrication, with volumes
by as early as 2024 at a 14-year high. Much of this growth will be driven by
exports from Italy, with its mechanized chain and findings output remaining
European Silver Jewelry competitive and as its overseas markets return to growth.

Fabrication
Consumption Drivers
Moz

40
Silver Prices
35 The impact of silver prices on jewelry consumption is limited chiefly due
30 to the very high margins in force, with the positives and negatives of
25 substitution to/from gold and base metals a distinct second. This is less
20 true in the lower income countries of eastern Europe but their contribution
15 to silver is modest – the 12 countries that joined the EU in 2004-07 made up
10 less than 10% of the GDP of the existing 15 countries in 2019, and our data
5 on fabrication suggests a slightly lower share of the regional total.
0
Economic developments
There are two features on the economic front that are of consequence
Italy Other specifically for Europe. First, the trauma that the 2008/09 financial crisis
Source: Metals Focus inflicted led to a wave of selling back of old jewelry, mainly gold. However,

20
Chapter 5: Country Analysis - Europe Silver Jewelry Report

European Silver Jewelry Designs

Silver bracelet with Necklace set with

alternated oval links cubic zirconia
by by
UNOAERRE Better Silver

Bi-color silver DNA Spring rings, incl

bracelets rose-plated,

by by

Pesavento Pesavento

rather than this creating a belief in gold’s store of value, it seems to have
been merely an opportunity to relinquish some dated product. As a result,
current economic uncertainty has not favored gold compared to other
jewelry segments. Second, the value of sales is heavily influenced by the
number of long haul tourists (especially from East Asia). However, the impact
of this on silver is small and so data on overall jewelry sales needs to be
treated with caution in the event of any extra-European economic crisis.

Structural changes to product offerings

There has, over the last few decades, been a sustained shift from
unbranded, plain silver items with a simple design to fancier, branded and
gemset products. However, much of this shift has already run its course. For
example, Société 5 reports that 55% of all silver jewelry was gemset in 2014
and that by 2019 this had inched up to 57%.

Of far greater relevance today is the revolution in retailing. This includes

the withdrawal of hypermarkets from the jewelry space, the decline of old
fashioned independents, the relative rise of multi-store mall-based retailers
and the even greater rise in online selling. (The exact mix varies greatly
though between countries.) On balance, this should benefit silver jewelry.

Competitive advantages and threats

One positive for silver is that interest in gold basics among lower income and
immigrant groups is far lower than in the US. Germans of Turkish descent,
for example, are reported to shop more like ethnic Germans than citizens

21
Chapter 5: Country Analysis - Europe Silver Jewelry Report

of Istanbul. As a result, our forecast of lower gold prices in a few years’ time
does not pose much of a threat to silver jewelry sales. Related to this is the
rapidly disappearing habit in southern Europe of buying 18-karat gold at key
life stages, such as baptisms or a first communion. Silver, however, has been
hampered in filling any gap due to its relatively lower status compared to
other precious metals. This stands in contrast to silver’s image in northern
Europe, where the metal (as in the US) is seen as much closer to gold than
the base metals.

To truly exploit any potential (in the absence of generic silver advertising),
there needs to be concerted promotion by brands specializing in the
metal. The issue of brands is critical because of their clear importance. For
example, Pandora’s sales in Italy and the UK combined in 2019 were 7%
greater than in the US. For much of the past decade, the brand star was
Pandora, but that faded, according to some trade contacts, due to a reliance
on a single category (charms) and the harmful move away from concessions
within others’ stores to stand-alone premises. It is possible that these issues
can be remedied, but others retail brands, such as Folli Follie and Thomas
Sabo, need to capture the attention of consumers in a more energetic way to
really lift sales. Success in this field has often been elusive, as illustrated by
the bankruptcy in January 2020 of one of the UK’s leading brands, Links of
London, and so it is far from certain that a brand-led sales push will emerge.

It also pays to monitor what is in many ways jewelry’s closest competitor,

watches. The latter has a far higher share of sales in the “greater jewelry”
category than in the US. For example, watches accounted for just 5% of
Signet’s fiscal year 2019 sales in North America, but 35% of their sales in the
UK and Ireland. With younger generations getting the time from cell phones,
there is clear scope for watch sales to slide, even with partial compensation
from smart-watches. It seems reasonable to expect that fashion jewelry,
including silver, will pick up some of this diverted expenditure. However,
the gains are expected to be small due to younger consumers’ growing
preference for experiences over goods and the superior promotion of rival
categories, such as the latest tech and luxury accessories.

The rise of online sales, as in the US, is thought to be a net positive for silver
jewelry due to its better targeted price points. However, this could prove
relatively small due to the conservative nature of retailing, especially in
southern Europe. There, we are still in the phase of a shift from independent,
traditional outlets to shopping malls and multi-store brands, such as Histoire
d’Or in France and Stroilli in Italy, and it will be interesting to see whether/how
these groups decide to push silver.

Structural growth in self-purchase by working women should also be a

net positive for silver and there seems good scope for the niche of men’s
jewelry. This at present is firmly skewed to base metals and alternative
materials, such as leather, but the segment is growing fast and offers some
potential for silver, certainly more so than for gold in today’s new styles.

22
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Chapter 6 East Asia

– E ast Asian silver jewelry fabrication is Introduction

expected to drop by 17% this year, driven East Asia is the world’s largest silver jewelry fabricator. This year’s estimated
by heavy losses in both Thailand and total of 50.4Moz (1,568t) accounts for one-third of global offtake and as
China. noteworthy as that appears, it pales against the 46% share achieved by
East Asia back in 2010. That reflects two dynamics, first the weakness
– The recovery next year in each country experienced in East Asian silver jewelry over the past decade. In other
will be noteworthy, with the regional total words, leaving aside the impact of the pandemic, jewelry demand fell from
falling only just short of 2019’s pre- 80.6Moz (2,507t) in 2010 to 62.8Moz (1,953t) last year. The second issue
COVID levels. were the dramatic gains achieved in India, where offtake surged from just
22.5Moz (770t) at the start of the last decade to 69Moz (2,164t) in 2019.
– Further ahead, successive gains
are forecast for East Asian offtake, In this chapter, we focus on East Asia’s two largest silver jewelry fabricators,
benefiting from healthy demand, both Thailand and China, with estimated 21.4Moz (664t) and 19.4Moz (603t) of
locally and overseas. fabrication respectively in 2020. They also rank second and third globally,
behind India (the largest fabricator by some margin), but ahead of Italy in
fourth place.

Thailand

2020 Overview
In keeping with many economies, Thailand has been severely impacted
by the pandemic, with its GDP declining by 12.5% y/y in Q2.20, the largest
economic contraction in 22 years (since the Asian financial crisis).
Importantly, while COVID-19 exacerbated the economic downturn, the Thai
economy was already experiencing a slowdown. For instance, the economy
shrank by 2.2% in the preceding quarter, putting Thailand into a technical
recession.

Turning to the jewelry sector, Thailand is a global manufacturing hub and the
world’s largest silver jewelry exporter. Each year, the country exports more
than $1.6bn worth of silver jewelry. It is thus not surprising that the pandemic
Thai Silver Jewelry Fabrication
has severely hit the country’s silver jewelry industry. Our discussions with

Moz the trade revealed that jewelry fabrication in the first half of 2020 fell by 40-
50% y/y, largely reflecting the slowdown in export demand. Thailand largely
35
exports jewelry to the US, Europe, and elsewhere across East Asia.
30

25 Most orders placed by buyers from Europe and the US in February at the
Bangkok Jewelry Show were eventually canceled due to the pandemic.
20
Overall, jewelry exhibitors witnessed at least 50-60% of order cancellations,
15 which created problems for the supply chain, as manufacturers had
10 already prepared finished goods which were on the verge of being shipped.
However, recent discussions with contacts revealed that European
5
buyers have now cleared some of the backlog, which should be a positive
0 development going forward. That said, orders originating from the US still
remain weak.

Source: Metals Focus

23
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Thai Silver Jewelry Designs

Silver Ring Inspired Bracelet

by Flowers by
by Silver Bar
Silver Bar

Silver Broach Tet Design

by by

Pranda Jewelry Silver Bar

By contrast, the domestic market has performed quite well. Despite limited
footfall, our discussions with retailers revealed strong buying by young
consumers. In keeping with many other markets, the country’s retail trade
has benefited from the growth in online purchases during the pandemic.
Perhaps understandably, those retailers and manufacturers who have put
in place e-commerce platforms have generally performed well. As a result,
compared to exports, domestic consumption is estimated to only fall by 10-
15% in 2020.

2021 Forecast
Looking at the forecast for next year, we expect to see a solid recovery for
Thai silver jewelry fabrication. With more than 80% of the country’s silver
jewelry fabricated exported, the outlook depends heavily on how Europe and
the US perform. Although we remain cautious about the economic outlook,
we expect to see healthy levels of restocking in these markets, which should
therefore benefit Thai export order books.

The Longer Term Outlook

Compared to some other large jewelry manufacturing centers, such as
India and China, Thailand has a relatively small domestic jewelry market.
Due to the country’s young demographic, household consumption has
performed somewhat better than exports, as the former tend to find silver
jewelry fashionable and reasonably priced. Furthermore, the sharp increase

24
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Thai Silver Jewelry Exports in the gold price has seen consumers shift from gold to silver for daily wear
usage. About 80% of silver jewelry sold in Thailand includes daily wear items
$ bn including earrings, pendants, bracelets and rings.
2.0
Beyond 2020, we are calling for broadly steady growth; naturally, a lot

1.6
depends on how the Thai economy improves. As alluded to earlier, one key
risk to the economic recovery in the near-term are the ongoing political
protests. Going back to jewelry demand, a further rise in the gold price would
1.2
benefit substitution towards silver jewelry. Manufacturers and retailers
are also focusing on online sales, which should positively help sales going
0.8
forward.

0.4 Consumption Drivers

0.0 Silver Prices

2010 2012 2014 2016 2018
Unlike South Asia, the Thai silver market is not particularly price-sensitive.
Source: IHS Markit The majority of the silver jewelry bought domestically is for daily wear, with
an average weight of 2-8g. The lower price point means that there is little
adverse impact on demand of an increase in the silver price. As mentioned
earlier, the increase in the gold price has benefited retail purchases of silver.

Economic developments
Strong economic growth and an increase in per capita income have helped
lift discretionary spending. That said, demand for silver jewelry has remained
broadly steady, ranging between 130-170t, largely due to a shift towards
lower weights. That said, an increase in income tends to benefit rural
communities’ demand. Thus, over the long-term the loss in demand due to
a reduction in average weights tends to be mitigated by the increase in rural
incomes.

Structural changes to product offerings

Our discussions with contacts point towards two important changes

Top-5 Thai Jewelry Export over the last decade or so, the growth of sterling jewelry and a reduction

Destinations in average weights. Historically, Thailand’s silver jewelry landscape was

dominated by traditional jewelry (including what is known locally as hill tribe
jewelry) that was typically made in the north of the country. However, over
the past ten years, consumers have shifted towards modern designs and
23%
sterling jewelry. Today, sterling jewelry dominates the landscape with more
30%
than an 80% market share. Traditional jewelry is now confined to certain
pockets and is worn on just a few occasions. The shift towards modern
3% designs has also led to a reduction in average weights.

6%
Structural changes to product offerings
In keeping with many other markets, online jewelry sales have grown
10%
appreciably, especially during the pandemic. As more people become
28%
accustomed to the ease of ordering through cell phones, we expect to see
the share of online sales increasing. That said, young consumers tend to
Germany United States prefer lifestyle products, such as cell phones and electronics, which act as a
China Australia
Hong Kong Rest of the World headwind for jewelry.
Source: IHS Markit

25
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Chinese Silver Jewelry China

Fabrication
2020 Overview
Moz US$/oz
The direct impact of COVID-19 and economic uncertainty have already hit
60 40 domestic retail jewelry demand, with China’s Statistics Bureau announcing
that gold and silver jewelry retail sales (by value) in the first nine months
50 35
fell by 13% y/y. We would expect the drop in sales weight to be larger given
40 30 the significant price rallies in both gold and silver. After the dramatic slump

30 25 in the first quarter, a recovery emerged from May onwards as life returned
to normal in most regions, and therefore footfall in jewelry stores has also
20 20 improved. As a result, monthly gold and silver jewelry retail sales have moved

10 15 from a 30% y/y in March to a healthy 13% increase in September.

0 10 However, the year-on-year growth in the September sales figure covers

the entire jewelry market, which will include the impact on sales values
of price upside. As local gold and silver prices rose by 18% and 24% y/y
China Silver Price respectively that month, we are skeptical about any underlying gains in

Source: Metals Focus China’s jewelry offtake. Looking at silver in isolation, many of our wholesale
and manufacturing contacts claimed sales in the third quarter (the traditional
peak season for silver jewelry demand) still experienced a combined 20% y/y
decline.

The headwinds remained in place, notably deteriorating consumer

sentiment, and structural changes, namely the shift away from heavy plain
jewelry in favor of lighter premium (higher margin) pieces. Meanwhile,
silver jewelry exports from mainland China have also suffered a marked
downturn so far this year. August customs figures suggest that year-to-
date shipments to the largest two destinations, the US and Hong Kong, fell
by 60% and 46% respectively in US dollar terms. Additionally, wholesalers’
and manufacturers’ more cautious attitude towards stock management,
in part due to increased price volatility, has also weighed on silver jewelry
fabrication.

In terms of the full year picture, we expect Chinese silver jewelry fabrication
to fall by 15%, a much better outcome than the 40% drop we predict for gold
jewelry fabrication. The out performance of local silver jewelry offtake can
be explained by the different impact both of each metals’ price gains and the
economic slowdown on the supply chain’s working capital liquidity and the
affordability of each product for Chinese consumers.

2021 Forecast
Looking ahead, we forecast a double-digit year-on-year gain for silver
jewelry fabrication in 2021. The rebound will chiefly be due to expectations
of improving consumer sentiment resulting from the government’s effective
control of COVID-19 and the ongoing economic recovery. However, silver
jewelry offtake in 2021 will still be 6% lower than 2019’s record high, partly
reflecting that some losses suffered are structural and so may not be
recouped. Meanwhile, wholesaler and manufacturer destocking is expected
to persist based on our bullish silver price forecast in 2021. Moreover,
jewelry exports to the US and Hong Kong are likely to remain lackluster.

26
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Chinese Silver Jewelry Designs

Bangle
Silver nacklace
by
plated with gold and
Laofengxiang
enamel

Earrings with pearls Bracelet

by by
Zhenshang Silver Zhenshang Silver

The Longer Term Outlook

Beyond 2021, we expect Chinese silver jewelry fabrication to enjoy further
growth over the next few years, although we believe it will still remain well
below 2013’s record high of 53.4Moz (1,662t). The upside we forecast
partly reflects the diminishing impact of the structural changes caused by
changing consumer preferences, namely the shift away from heavy plain
items towards lighter premium and design-focused pieces. Furthermore,
the gains are based on our assumption of improving Chinese consumer
sentiment, further growth in some key export markets and the supply chain’s
successful development of new designs and collections. Importantly, these
higher margin items will enable retail demand to withstand those occasions
when the silver price strengthens.

Consumption Drivers

Silver Prices
In our view, the silver price has little impact on silver jewelry consumption
in China, mainly because of the very high retail margins. Feedback from
our trade contacts suggests there has been little or no adjustment to retail
prices of silver jewelry pieces so far this year. Meanwhile, as the silver price
rallies, one might expect some consumers to substitute between the two
markets, based on affordability. However, we do not expect the Chinese

27
Chapter 6: Country Analysis - East Asia Silver Jewelry Report

Pandora’s Sales in China silver jewelry market to benefit from such a shift. This is primarily due to the
structural changes that have emerged in the gold market in recent years.
Krone mn
This saw growing availability of light and premium designs with attractive
600
retail prices of around 1,000rmb. In addition, the trend of duplicating
successful designs in gold is now firmly established, having started a few
500
years ago as many silver jewelry manufacturers’ budgets often cannot
extend to large-scale investment in R&D and marketing activities.
400

Economic developments
300
The impact on consumer sentiment as a result of the economic slowdown
in China has been one of the significant headwinds facing silver jewelry
200
consumption since 2019, which has accelerated in 2020. Although the

100 government has conducted fiscal and monetary stimulus policies, we

are skeptical that it will be sufficient to improve consumer spending on
discretionary items in the short-term. Moreover, sales generated from shops
Q1.16 Q1.17 Q1.18 Q1.19 Q1.20 in tourist locations (especially in south-Western regions) have also struggled
Source: Pandora Annual Report as footfall is still relatively constrained in the wake of the pandemic.

Structural changes to product offerings

Changes in Chinese consumer preferences, away from conventional and
plain jewelry and towards lighter premium pieces, has affected demand
across all precious metals. This reflects the growth of younger, fashion-
conscious and dynamic“spending classes” in the country. That said, after
four consecutive annual double-digit declines over 2014-17, the impact
of this has started to diminish. As such, the drop in the last two years and
our pre-virus 2020 forecast for China’s silver jewelry offtake was only a
single-digit. This partly reflected the supply chain’s much improved efforts
in product innovation, resulting in increased assortments. The market has
also received strong support from collections featuring popular licensed
designs, cultural elements, better integration with different materials (e.g.
enamel, crystal and zirconia) and the growth in independent designer
brands. Although now less pronounced, the impact of structural changes on
demand is likely to persist for the foreseeable future.

Competitive advantages and threats

Our feedback from bricks and mortar stores suggests that competition
from non-precious metals is limited. This is because silver jewelry benefits
from comparative advantages from the metal’s traditional characteristic of
good luck and fortune in China, its feature as a precious metal, as well as an
established image of fashion and strong wearability.

Benefits of branded silver jewelry

On the back of Chinese consumers’ increasing brand awareness, we have
seen leading retailers typically outperform the rest of the market. This is
more evident when looking Pandora sales, which reported ongoing and
strong growth since its launch in China earlier this year. Local retailers have
also focused more on brand development as well as building brand loyalty.
For example, some leading retailers offer free cleaning and exchange
services over the product lifetime and invest heavily in developing premium
designs and licensing (e.g. famous cartoon or film franchises).

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Silver Jewelry Report

The Metals Focus Team

Philip Newman, Managing Director Nikos Kavalis, Managing Director - Singapore

Charles de Meester, Managing Director Adam Webb, Director of Mine Supply

Neil Meader, Director of Gold and Silver Wilma Swarts, Director of PGMs

Junlu Liang, Senior Analyst Philip Klapwijk, Chief Consultant

Simon Yau, Senior Consultant - Hong Kong Chirag Sheth, Principal Consultant - Mumbai

Peter Ryan, Independent Consultant Yiyi Gao, Senior Analyst - Shanghai

Elvis Chou, Consultant - Taiwan Çagdas D. Küçükemiroglu, Consultant - Istanbul

Michael Bedford, Consultant Dale Munro, Consultant

David Gornall, Consultant Harshal Barot, Senior Consultant - Mumbai

Mansi Belge, Research Associate - Mumbai Sarah Tomlinson, Analyst

Adarsh Diwe, Research Associate - Mumbai Francesca Rey, Consultant - Manila

Neelan Patel, Regional Sales Director Celine Zarate, Consultant - Manila

Ana Monsivais, Sales Executive Jie Gao, Research Analyst - Shanghai

Mirian Moreno, Business Manager Gloria Titilayo, Office Manager

About Metals Focus

Metals Focus is one of the world’s leading precious metals consultancies. We specialize in research into the global gold, silver,
platinum and palladium markets, producing regular reports, forecasts, proprietary data and bespoke consultancy.

The quality of Metals Focus’ work is underpinned by a combination of top-quality desk-based analysis, coupled with an
extensive program of travel to generate ’bottom up’ research for our forecasting reports and consultancy services. Our
analysts regularly travel to the major markets speaking to contacts throughout the value chain from producers to end-users, to
obtain first hand and unique information for our reports.

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Silver Jewelry Report

Contact Details
Address: 6th Floor, Abbey House, 74-76 St John Street, London, EC1M 4DT
Telephone: +44 20 3301 6510
Email: [email protected]
Bloomberg Metals Focus Launch Page: MTFO
Bloomberg chat: IB MFOCUS
Twitter: @MetalsFocus
www.metalsfocus.com

Disclaimer & Copyright, December 2020

This report is published by, and remains the joint copyright of, Metals Focus Ltd and The Silver Institute. Although every effort has been
made to undertake this work with care and diligence, Metals Focus Ltd and The Silver Institute cannot guarantee the accuracy of any
forecasts or assumptions. Nothing contained in this report constitutes an offer to buy or sell securities and nor does it constitute advice
in relation to the buying or selling of investments. It is published only for informational purposes. Metals Focus Ltd and The Silver Institute
do not accept responsibility for any losses or damages arising directly or indirectly from the use of this report.

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