Industry Analysis

Bullish Predictions for 2019 Holiday Sales Despite Concerns, Sotheby’s Hong Kong Auction Sales

A diamond necklace that features a 100.02 Fancy Intense yellow diamond. The pendant is done in the shape of a musical instrument.
GIA alumna Anna Hu’s necklace design features a 100.02 carat cushion-shaped Fancy Intense yellow diamond showcased in the shape of a Chinese musical instrument – Dunhuang pipa – and embellished with variously shaped and brilliant-cut diamonds mounted in 18K white and yellow gold. The pipa can be detached and worn as a pendant/brooch. It sold for $5,780,056. Photo by Michael Oldford. Courtesy of Sotheby’s

Holiday retail sales in the U.S. will increase by 3.8% to 4.2% over last year, the National Retail Federation (NRF) predicted. Online retail sales will increase about 11% to 14%, the NRF estimates.

The organization acknowledged that American consumers are concerned about political and economic uncertainties and worried that tariffs will bring higher prices – another survey found that new tariffs will cost households $862 this year on average – but noted that they are generally in good financial shape, which should cancel out most concerns.

Specific to jewelry, the Edge Retail Academy, a consulting firm for independent retail jewelers, noted that sales of colored gemstones have been strong all year and that, while unit sales of colored stone jewelry have increased only 2%, dollar volume is up 16% as consumers seek higher-priced pieces. The Edge also noted that diamond jewelry sales were running about 5% ahead of last year.

Another survey from RetailDive, a news service for retail executives, said that tariffs may add as much as 15% to popular gift products, such as smartwatches, TVs, audio gear and, coming this quarter, video game consoles and even smartphones. Like the NRF, the RetailDive survey found that, while they are increasingly anxious about the gyrating stock market, political rhetoric and trade wars, consumers still have the means to keep spending.

The Conference Board Consumer Confidence Survey found similar concerns in reporting that confidence dropped sharply in September.

Not everyone is benefitting from consumers’ spending mood. RetailDive reported that a record 7,300 retail stores have closed in the U.S. this year. Much of this number comes from the decline of large, regional shopping malls that have been losing business for years, which is accelerated by the fact that their traditional “anchor” stores have seen their own sales deteriorate.

After the holiday season, there remains a big question mark. At least one major bank’s forecast sees U.S. retail slowing down.

UBS, a major Swiss investment bank, is predicting a 2% decline in U.S. retail jewelry sales next year, in the wake of a slowing economy and bearish stock market. It believes the stock market will decline an average of 13% next year, putting a brake on consumer sentiment and dampening demand for luxury products, including jewelry.

The bank predicted, however, that Chinese demand would begin to recover because consumers there will have adjusted to the effects of the trade war. A majority of them remain optimistic for the coming year, but report says that consumers will likely opt for pieces with lower price points.

In Hong Kong, however, the ongoing protests caused August retail sales of jewelry and watches to plunge 47% from the same month last year, the government statistics agency reported. Tourism was down 39% and visitors from the mainland were down 41%.

The frames of the earrings are designed a scroll from which a pink conch pearl dangles. The scrolls are comprised of blue sapphires and diamonds to look like piano keys.
Hu's Ellington earrings feature a conch pearl, suspended from a scroll surround designed as piano keys. They are set with rectangular sapphires and baguette diamonds in 18K white and pink gold. They sold for $278,819. Courtesy of Sotheby's


A jewel designed by GIA alumna Anna Hu, on commission from Sotheby’s, drew a winning bid of $5.8 million at the auction house’s Oct. 7 Hong Kong sale. The necklace features a GIA-graded 100 ct Fancy Intense yellow diamond set in the shape of a Dunhuang pipa, a traditional four-stringed Chinese musical instrument that is depicted in an ancient mural in Dunhuang. The piece sold for well above its pre-sale estimate and was the costliest of four items in her Silk Road collection, all of which sold at the auction.

Brooch is styled as a cello, with the body in green jadeite that is framed in yellow and colorless diamonds.
Hu’s stylized cello brooch is set with jadeite cabochons of emerald green color and accented with brilliant-cut diamonds and diamonds of yellow tint, highlighted by a circular-cut pink sapphire, mounted in 18K white and yellow gold. It sold for $278,819. Courtesy of Sotheby's

Hu’s conch pearl, sapphire and diamond pendant earrings, titled “Ellington,” sold for $278,819; her jadeite, diamond and pink sapphire “Cello” brooch brought the same price; a conch pearl, diamond and blue enamel “Blue Magpie” brooch drew a top bid of $254,920; and a ruby and diamond “Appassionata” ring sold for $103,561. Part of the proceeds from the sale of Hu’s designs went to the Silkroad, a charity established by cellist Yo-Yo Ma.

Hu earned her GIA Graduate Gemologist® diploma and a GIA Jewelry Design Certificate in 1997.

Woman stands in a long, ornate hallway, dressed in formal gown.
Portrait of jewelry designer Anna Hu taken in Paris. Courtesy of Sotheby’s

In addition to sale of the Hu pieces, a buyer paid nearly $20 million for a 10.64 Fancy Vivid purplish-pink diamond. At $1.9 million per-carat, the price was below prices paid for pink diamonds auctioned several years earlier, but still strong.

The auction market remains selective with several major pieces, including an 89.88 ct D fl emerald cut diamond and a 11.88 ct Burmese ruby, failing to attract bids.


As expected, De Beers kept its September cycle sales low -- $295 million – which is slightly higher than August, but 39% below the $482 million it allocated the corresponding month last year.

De Beers is permitting clients to refuse up to 50% of their allocations and continues to offer to buy back 30% of the 2 to 10 ct rough diamonds it has sold this year. Such buy-backs are unprecedented for De Beers, but with industry banks no longer funding rough purchases that they deem unprofitable, the company has little choice. Prices of polished diamonds have to rise for the banks to resume lending and the only way that can happen is to reduce supplies in dealers’ hands.

The Financial Times reported that De Beers’ yearly sales are running 27% below last year’s levels. De Beers said its priority is to help the industry recover from this period of soft prices and oversupply that continue to sap profitability and undermine polished prices, which also continue to ebb.

Diwali, the holiday during which the Indian gem and jewelry industry takes a traditional two-week break, begins Oct. 27. Sometimes manufacturers extend the break during periods of slack demand, so the industry will be watching closely to see how many of them delay their reopening and for how long.

Russell Shor is senior industry analyst at GIA in Carlsbad.