Gold Prices Surge, No One Buying?

The price curse of "gold must fall during long holidays" was broken during the just-concluded National Day holiday.

During the long holiday, the gold price remained high at 600 yuan. As of October 7th, the domestic gold price was 598 yuan per gram, which was 150 yuan higher than the same period last year's 448 yuan.

As the gold price continues to rise, the price of gold jewelry has also reached an "unbelievable" level for consumers. The listed price of jewelry gold remains high, with most brands listing gold prices around 770 yuan/gram.

The sustained high gold price has deterred many gold buyers. The National Day holiday, as a traditional peak season for gold jewelry sales, has seen the once bustling gold shops become desolate, losing the once bustling customer flow.

When will the gold price, which becomes more expensive the longer you wait, finally drop?

The more you wait, the more expensive the gold jewelry becomes.

"I have always wanted to buy a gold bracelet, but I was worried about buying at a high price. However, I didn't expect that the longer I wait, the more expensive it becomes. Now, the listed gold price of nearly 800 yuan/gram is really hard to start."

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Li Li said on social media that she has been waiting for the gold price to fall, from 540 yuan/gram at the beginning of the year to the current 600 yuan/gram. Her hesitation has made her miss a good opportunity to buy, "I will buy a gold bracelet when the gold price falls to 580 yuan, but this National Day is out of the question again."

There are many consumers who are waiting and seeing, like Li Li. This waiting sentiment has spread during the National Day period. China News Weekly visited many gold shops during the National Day, and although the promotion was not small, the business of some gold shops was relatively cold, and the salespeople often stood at the door in unison.

Song Jiangzhu, a researcher at the Beijing Gold Economic Development Research Center, told China News Weekly that there is a saying in the gold industry that "gold is in September and silver is in October". In the past, the National Day holiday coincided with the Mid-Autumn Festival, and the National Day period was also a peak season for weddings. There were more scenarios such as wedding three golds, festival gifts, and self-use collection.However, a gold shop salesperson told China Newsweek that compared to last year, there has been a decrease in customer traffic during this year's National Day holiday. Under the sentiment of waiting and seeing, there were not many transactions that were concluded on the spot, and "the overall benefit is definitely not as good as last year."

Behind the cold front during the peak season, the high price of gold has become the direct reason for people to be deterred. Most gold brands' listed prices are 20% to 30% higher than the international gold price, and on this basis, gold jewelry also requires an additional processing fee, which means that consumers' purchase costs are higher.

Taking the listed prices of major gold shops on October 7 as an example, Chow Tai Fook, Chow Sang Sang, Saturday Fortune, Gold Supreme, Lao Miao Gold, Lao Feng Xiang, Chao Hong Ji, Xie Ruilin, and Luk Fook brands are priced at 773 yuan/gram; Chow Sang Sang's brand price is 770 yuan/gram, Cai Bai is 748 yuan/gram, China Gold is 731 yuan/gram, and Shui Bei Gold is 606 yuan/gram.

A gold shop salesperson said frankly that for most people, gold jewelry is not a necessity, and the price increase has exceeded the affordability of some consumers. "Gold prices change daily, and they are still at a high level recently. Even consumers with purchase plans will choose to wait and see."

Li Li remembers very clearly that on the eve of last year's National Day, the gold price was still in the 480 yuan range, but it plummeted to the 450 yuan range during the long holiday, and many consumers who bought gold in September regretted it.

But this year's gold market seems completely different. During the entire National Day holiday, the gold price remained stable at around 600 yuan. "I regret it very much. If I had bought a 30-gram gold bracelet at this time last year, I could have saved at least 3,600 yuan," Li Li lamented.

Faced with consumers' hesitation, gold shop salespeople often use the following rhetoric: "Actually, it's still cost-effective to buy now because the price of gold has been rising. If it continues to rise, you won't lose money even if you recycle it later."

Despite this, under the condition of limited consumer budgets, gold consumption has also been greatly suppressed.

According to statistics from the China Gold Association, the national gold consumption volume in the first half of this year was 523.753 tons, a decrease of 5.61% compared to the same period in 2023. Among them, gold jewelry was 270.021 tons, a year-on-year decrease of 26.68%; the World Gold Council's report shows that the demand for gold jewelry in the Chinese market in the second quarter of 2024 reached a new low since 2009, only 86 tons, and the gold jewelry consumption in China in the first half of the year decreased by 18% year-on-year to 270 tons.

In order to sell gold, gold shops are doing their best.In order to stimulate demand, gold shops have employed a myriad of strategies.

Generally speaking, the price of gold jewelry is determined by three factors: the price of gold, weight in grams, and labor costs, which have become the areas where gold shops focus their efforts.

China News Weekly found through visits that during the National Day holiday, some gold shops introduced significant discounts. Brands such as Chow Tai Seng, China Gold, and Chao Hongji offered discounts of over 100 yuan per gram of gold, with the discounted price around 630 yuan/gram, with labor costs calculated separately.

Taking China Gold as an example, during the promotional period, China Gold offered a 100 yuan reduction per gram and a 20% discount on labor costs. In addition, a single piece of fine gold jewelry was offered at an 88% discount, and two pieces at an 80% discount. A salesperson stated, "The discount is substantial and will no longer be available after October 7th."

Promotion activities in some county-level gold shops were even more diverse. For instance, they offered promotions such as a 500 yuan gift of colored gold with a purchase of 2000 yuan or more, discounts on craftsmanship fees and buyback fees for exchanging old for new, exclusive luxury wedding gift packages for purchasing "three golds and one diamond" in wedding scenarios, and membership lotteries.

Promotion poster of a county-level gold shop. Photo by Yu Shengmei.

In addition to direct price concessions, gold shops also competed in product design.

Several gold shop salespeople told China News Weekly that current gold jewelry products are particularly innovative, and young people prefer designs that are novel, which can help to lower the price.

"Because the price of gold is high, more consumers are choosing smaller weights. After all, a co-branded solid gold bracelet can be purchased for a few hundred yuan at a lower price. We will recommend products based on the customer's budget or needs, such as pure gold bracelets, gold bead bracelets, and woven gold jewelry cords, with options for all budgets," said a gold shop salesperson.

Gold jewelry co-branded with anime IPs in a gold shop. Photo by Yu Shengmei.Lightweight gold jewelry with lower per-customer transaction values is seeing an increase in variety. For instance, a gold shop in Shuibei has launched a collection of gold pendants ranging from "0.2-1 gram," offering the joy of "1 gram of small fine gold." Additionally, there are goldsmith shops introducing "1 gram gold plain circle bracelets," allowing customers to purchase genuine gold bracelets for just a few hundred dollars.

Zhang Dong, a renowned jewelry expert and a national senior gold investment analyst, told China Newsweek that as gold prices continue to rise, jewelry retailers have begun to focus on the "light gold" products that have been introduced in recent years, such as the 5G gold produced through special techniques. "The current industry hot item, 'micro-hard gold,' is mainly to cater to the general trend of weakening consumer purchasing power and a downward trend in per-customer transaction values."

China Newsweek learned through visits that 5G gold jewelry is similar to K-gold in terms of its smooth surface, but it is lighter in weight and has greater hardness. Chen Hanyi, a director of the China Jewelry and Jade Ornament Industry Association, introduced to China Newsweek that the World Gold Council is guiding and promoting retailers to take a hard and lightweight approach in product design, increasing the hardness of gold and making the products thinner and lighter, following a youthful and fashionable route.

Under the基调 of low per-customer transaction values, gold-plated silver products have also begun to gain popularity. On social platforms, discussions related to "gold-plated silver" have exceeded 430,000 entries. China Newsweek learned from a gold-plated silver brand that the price structure of gold-plated silver products is: the current day's price of gold and silver + labor costs. The product range is also quite comprehensive, and the sales promise "recovery according to the reported weight of gold and silver at the time."

The biggest feature of this type of product is its affordability. Taking a bracelet in the style of crushed ice as an example, a 20-gram gold-plated silver bracelet costs around 2300 yuan, while a pure gold bracelet of the same weight and similar craftsmanship would cost at least 13,000 yuan without including the craftsmanship fee.

Gold-plated silver merchants provide some bracelet styles. Photo/provided by the interviewee.

Although silver-plated gold or gold-plated silver products are very similar in appearance to pure gold products, they obviously cannot be equated, and such products carry certain risks and even technical flaws.

Zhang Dong warned that silver-plated gold mainly has a thin plating, generally below 3 microns, which will oxidize in about a year; while gold-plated silver, due to the larger amount of gold, oxidizes relatively slowly, but there will be a certain degree of oxidation after about 2 years.

Song Jiangzhen advised consumers to either buy gold or silver. Gold-plated silver or silver-plated gold products, if clearly priced and clearly explained, are acceptable, "Some related factories upstream do this under pressure, but such products actually do not conform to the long-term interests of the industry."

When will gold prices continue to rise?As gold prices soar, the pressure on gold shops also increases day by day.

Gold shops have to face the fluctuations at high gold prices and also face the dilemma of a decrease in customer flow. At present, with the store layout relatively saturated, the business level is facing certain challenges.

"With gold prices setting new records since March 2024 and consolidating at high levels in the second quarter, gold jewelry consumption has also slowed down since March and declined in the second quarter. The aforementioned factors have led to weak gold jewelry consumption, and the jewelry consumption market is under pressure." Chow Tai Seng described in the 2024 semi-annual report.

The financial report for the second quarter of 2024 released by Chow Tai Fook shows that the retail sales in the second quarter decreased by 20% year-on-year. Looking at the product category, from April to June, Chow Tai Fook's same-store sales of gold jewelry and products in Mainland China decreased by 27.9%; the business data of Luk Fook Group from April to June this year also shows that its overall retail revenue fell by 23% year-on-year.

The gold shops that used to open more and more have also begun to contract. In the first half of this year, Chow Tai Fook's store count in Mainland China decreased by a net of 180; in the second quarter of this year, Luk Fook Group's net reduction of stores worldwide was 99, and the net reduction in Mainland China was 102 stores.

The trend of rising gold prices may continue.

From a global market perspective, Guoxin Futures Research Analysis pointed out that geopolitical tensions and the gold purchase process of central banks around the world may be favorable for gold prices. At the same time, the uncertainty brought by the US election will also support gold to a certain extent. "Gold prices are expected to remain strong in the next period, and more signals from US economic data need to be closely monitored."

Wang Hongying, Dean of the China (Hong Kong) Financial Derivatives Investment Research Institute, told China News Weekly that under the current trend of loose monetary policy in our country, the rise in gold prices in the medium and long term is likely to be a high-probability event.

On the other hand, although gold jewelry consumption has cooled down, the investment enthusiasm for gold remains high. According to the statistical data of the China Gold Association, the consumption of gold bars and coins in the first half of 2024 surged by 46.02% year-on-year.

Wang Hongying believes that in terms of investment, it is necessary to maintain a rational mood. After all, after gold prices hit a new high, there is a possibility of a technical correction in the short term. It is recommended that investors do not add leverage and purchase reasonably according to their needs."If it's not particularly urgent, more planning can be done, such as setting a time period to purchase gold, buying once a month or once a week, and purchasing in batches to mitigate the risk of price fluctuations," Song Jiangzhen suggests. In the short term, for some essential scenarios, purchases can be made during promotional sales when prices are reduced; from a long-term investment perspective, investors can enter the market in small increments and in batches.

Chen Hanyi believes that the momentum for gold to rise is still present. "Now, if you think the listed gold price of over seven hundred yuan is expensive, maybe by this time next year, everyone will think this price is acceptable to buy. It is basically impossible to return to the gold prices of the past year."