The World Gold Council’s first quarter report shows demand from China for gold jewelry jumped 21 percent year on year to 142.9 tons, but some fund managers are betting on diamond and gem set jewelry to give higher returns.
 |
AP |
"Gold no longer satisfies status demand, you need bling, you need something shiny, you need diamonds, " says Eddie Tam who runs the hedge fund CAI Global.
The fund, which returned 48 percent last year has increased its exposure to two high-performing Hong Kong listed jewelry stocks - Look Fuk[0590.HK 29.80 
0.20 (+0.68%)] whoseshares have surged 261 percent over one year and Chow Sang Sang [0116.HK 22.20 0.35 (+1.6%)], which is up 80 percent over the same period.
0.20 (+0.68%)] whoseshares have surged 261 percent over one year and Chow Sang Sang [0116.HK 22.20 0.35 (+1.6%)], which is up 80 percent over the same period.Edwin Fan, who covers the jewelry sector for Bank of China International is equally bullish on both names, which he rates as a buy.
"The strong gold and diamond prices of late as well as the mounting inflationary pressures bode well for Hong Kong jewelers in terms of both revenue and margins."
Jewelry chains enjoy a 10 percent profit margin on gold, but hedge fund manager Tam says they can make 3 to 5 times more on gem set jewelry.
So far, the bulk of jewelry chains’ revenues still come from gold. A spokesman for Chow Sang Sang told CNBC, 55 percent of their sales come from gold and just 35 percent from non-gold jewelry. The rest comes from watches.
But Tam expects this product mix to change, with diamonds and gem set jewelery set to grow as advertising campaigns try and influence more Chinese men to buy diamond engagement rings.
According to De Beers, diamond sales grew 25 percent in China in 2010 and the country is now tied with Japan as the second-biggest consumer of diamonds, with the U.S. taking the top spot. Tam says China's demand for diamonds is about to go non-linear because of income growth and will soon hit high double-digit percentage increases, if not triple digits.
Despite being bullish, Bank of China says investors need to be wary of two risks. For one, same store sales may drop if China experiences a major slowdown caused by a downturn in the property sector. And two, both companies have large inventories of gold and diamonds that could decline in value if jewelry prices drop.
World's first floating gas platform set for WA
Updated
The floating LNG platform approved by Shell will be longer than four soccer fields laid end to end (Shell)
Global petroleum giant Shell has confirmed final approval for a 488-metre-long floating gas processing platform to be situated 200 kilometres off the Western Australian coast.
Shell says the project, called Prelude, will be the world's first floating liquefied natural gas (LNG) facility.
The vessel will be built in a South Korean shipyard and is roughly the size of six of the world's largest aircraft carriers put together.
Shell says when fully loaded, it will weigh 600,000 tonnes and will contain five times more steel than the Sydney Harbour Bridge.
The company says using floating platforms will allow it to access gas deposits far out to sea that would be uneconomic if the gas had to be piped to land for processing.
Shell says the vessel has been designed to withstand the strongest category five cyclones.
LNG carriers will dock with the processing plant to be loaded with liquefied natural gas, chilled to minus 162 degrees Celsius.
Shell expects to start operating the plant by about 2017 and spokesman Malcolm Brinded says the extraction and processing of gas will happen on the same site.
"Where it will cool the produced gas into a liquid on the spot, then ocean-going carriers will offload the LNG as well as other liquid by-products for delivery to market," he said.
Federal Resources Minister Martin Ferguson says the project will benefit the entire Australian economy.
"Over $45 billion to Australia's GDP; around 1,000 jobs; $12 billion in tax revenues; $12 billion to be spent on Australian goods and services; and a boost in our balance in trade by at least $18 billion of the 25-year life of this project," he said.
Gold makes a nice move today.
Gold makes a nice move today.
CHART POTENTIAL
On the charts, gold kept finding support at its 50-day moving average, a level it has held for more than three months.
"Gold's been given every opportunity to break this week, and it has refused to do so, and now it appears in the process of breaking out to the upside instead. We are much impressed ... enough so to add to our gold positions," said Dennis Gartman, publisher of The Gartman Letter.