Small jewelers in Hong Kong fear they may be driven out of business by a price war in gold.
The Hong Kong Jewellers’ & Goldsmiths’ Association Ltd. (HKJGA) and the Kowloon Pearls, Precious Stones, Jade, Gold and Silver Ornament Merchants Association have ceased to offer standard gold prices to their member merchants since Monday, Apple Daily reported Thursday.
The decision was made in response to the coming into effect of the Competition Ordinance last week.
The result is that retailers’ gold prices now differ by up to HK$120 per tael for the first time in three or four decades.
Smaller jewelry stops are worried that this is the start of a vicious price war that could eliminate them from the market as victims of cutthroat price tactics.
Before the competition law came into effect, all jewelers in the city maintained their retail gold prices at the levels prescribed by the two merchants’ associations.
Apple Daily reporters have found that gold prices in stores in Sham Shui Po, Causeway Bay and Wan Chai can differ by up to HK$120 per tael on the selling side and HK$150 per tael on the buying side.
Prices at major gold and jewelry chains remain more or less the same, with the likes of Luk Fook Holdings International Ltd. (00590.HK), Chow Sang Sang Jewellery Co. Ltd. (00116.HK), Tse Sui Luen Jewellery (International) Ltd. (00417.HK), still keeping their selling price at HK$11,580 per tael, and the buying price at HK$10,250 per tael.
Ming Jun Jewelry Co. Ltd., a small store in Wan Chai, said it now sets its daily gold price with reference to the London and Europe price indexes.
A member of the staff said it is like going back to the old days before the two merchants’ associations were formed.
The employee said the profit margin in selling a tael of gold, which could fetch HK$11,480-HK$11,600, is only a few hundred dollars.
The owner of Mei Lai Wah Jewellery in Sham Shui Po, surnamed Tang, said he would rather have benchmark prices for retailers to follow.
“If everyone competes on price, small operators like us will be forced out of the market at the end of the day,” Tang said.
Simon Lee Siu-bo, assistant dean of the Chinese University of Hong Kong’s business school, said the scrapping of standard gold prices by the two merchants’ associations will make jewelry stores become like foreign exchange outlets, where there are still price differences despite the existence of market exchange rates.
It means that consumers will have to compare prices on their own, Lee said.
– Contact us at [email protected]