Hefty price dims Chinese gold and platinum demand

Lisa Chen's heart sinks whenever the large screen looming over her counter flashes a price.
"When I started work here four years ago, platinum was only 170 yuan per gram. Now it's doubled to 249 yuan," she said from the counter of a large jeweller's along one of Shanghai's chic shopping thoroughfares.
"People still come and look, but now they're thinking twice before buying," Chen said.
Sky-high prices could take some of the shine off demand in 2004 from the world's fastest-growing market for precious metals, industry experts say.
Platinum - the choice of a burgeoning, fashion-conscious urban elite - would be especially hard-hit with prices of the metal hovering near 24-year highs above $850 an ounce.
Gold is near 15-year peaks of $430 an ounce, but demand should hold steady.
"In China, platinum is looked upon as a pretty ornament, but people see gold as money - the higher the price, the more valuable it is. People would want to buy some and keep it as an investment," said Liu Shan'en, an analyst at the state-linked Beijing Gold Economic Development Research Centre.
"There'll be pressure on platinum this year, but gold is different because of its role as an investment metal."
In the long term, however, China remains the brightest hope for an industry coping with slack sales growth elsewhere.
China, where demand for platinum jewellery was virtually non-existent as recently as five years ago, is now the world's largest single market for platinum jewellery.
The country is also the world's third-largest gold market.
Sales of gold jewellery and accessories have been climbing 15 percent annually, reaching 80 billion yuan ($9.67 billion) in 2002, according to the China Gold Association.
Annual gold jewellery sales are expected to hit 189 billion yuan ($22.8 billion) by 2010 - accounting for more than a 10th of global sales, the industry body added.
What will drive that demand is a middle class whose ranks are swelling as a result of rapid economic growth.
Global card issuers MasterCard International expect the number of affluent Chinese - defined as those with annual incomes of $5,000 or higher - to leap to 120-180 million in 10 years from an estimated 60 million now.
Yet analysts expect a blip in demand in the short run as hefty price tags spook Chinese buyers.
Platinum jewellery demand from China would slip for the first time since the market took off in the mid-1990s, says Johnson Matthey Plc, the world's top platinum distributor.
Sales of platinum jewellery were seen down 19 percent to 1.2 million ounces in 2003, it said in a November report.
Rocketing platinum prices have already squeezed margins of jewellery makers, prompting them to hold back metal purchases until price ease or retail prices are raised, analysts say.
"Jewellers and retailers are waiting for prices to fall before buying more," said Agnes Wu, marketing manager for Platinum Guild International in Shanghai, which promotes the metal.
Jewellery stores even in China's richest city are resorting to a battery of sales gimmicks, but die-hard customers remain.