In May 2025, Hong Kong witnessed a nuanced retail landscape: while total retail sales rebounded modestly, rising 2.4% year on year to HKD 31.32 billion ($3.99 billion), sales of luxury goods—specifically jewelry, watches, clocks, and other valuable gifts—contracted by 3.2% to HKD 3.87 billion ($493.1 million). This divergence offers critical insights into the shifting dynamics of consumer behavior, external macroeconomic pressures, and sector-specific challenges.

Several interrelated factors contributed to the luxury segment’s decline. First, surging gold prices significantly dampened consumer appetite for jewelry purchases, as higher costs discouraged discretionary spending on big-ticket items. Second, demand for luxury products on the Chinese mainland softened, reducing the influx of high-spending tourists traditionally pivotal to Hong Kong’s retail sector. Lastly, increased outbound tourism encouraged local consumers to shop abroad, further eroding domestic sales.

From January to May 2025, hard-luxury sales dropped by 9% to HKD 20.27 billion ($2.58 billion), while overall retail sales fell 4% to HKD 155.05 billion ($19.75 billion). These figures highlight a broader recalibration within Hong Kong’s retail environment, reflecting evolving consumer preferences and economic headwinds.

• Strong US labour market data which indicated that businesses added more jobs than anticipated in June and that the unemployment rate unexpectedly fell to 4.1% served as a lid on gold’s gains and strengthened the case for the Federal Reserve to keep interest rates unchanged.
• It is anticipated that President Donald Trump’s big package of tax and spending cuts, which was adopted by the House on Thursday, will increase the national debt by nearly $3 trillion over the next ten years.
• In contrast, Trump announced that he will start writing to nations on Friday, outlining the tariff rates they will be subject to on US imports. This is a significant change from his previous promises to negotiate individual agreements.

Technical Triggers  

• Gold is expected to trade in the range of $3300 (~Rs 96000) and $3400 (~Rs 98500) this week.
• Silver has given a breakout of its range, trading above $37 (~ Rs 108,000). Now next target is $38 (~Rs 111,000)

Gold recently climbed to $3,334 an ounce, while silver reached a 13-year high of $35 per ounce, reshaping dynamics in New York’s Diamond District. The rally has triggered a wave of consumers selling gold items rather than buying, leading to cash shortages among retailers constrained by bank credit limits. Transactions exceeding $2,500 are largely settled via checks or wire transfers.

Retailers report growing inflows of solid gold timepieces and vintage jewelry, with gold-intensive models fetching significant premiums. A Rolex Submariner, for example, now commands between $25,000 and $40,000, supported by rising gold prices.

Licensed precious metals dealers operate specialized facilities to melt gold, silver, and platinum into tradable bars. Demand for liquidation of assets is evident, with stalls stocked with items like silver menorahs and candlesticks awaiting smelting.

However, limited cash availability remains a challenge, occasionally costing dealers potential sales as customers move to competitors. Banks and security services maintain tight control over cash deliveries to curb risk.

High gold prices have made selling more attractive than buying. Traditional jewelers, who focus on finished pieces, face softer demand as consumers resist higher costs. Meanwhile, some investors prefer to buy bullion or coins as a hedge against economic uncertainty, reflecting continued faith in precious metals as a store of value.

Overall, while precious metals trading activity remains robust, the market tilts heavily toward sellers, putting pressure on liquidity and compressing retail margins.