Recently, both spot gold and COMEX gold futures have reached historic highs, surpassing the $2700 per ounce mark for the first time. With international gold prices continuing to rise, the retail prices for 24-karat gold jewelry in domestic markets have also hit new peaks, with some prices exceeding 800 RMB per gram. As of October 21, brands like Chow Tai Fook, Liufu Jewelry, and Chow Sang Sang reported retail prices for 24-karat gold jewelry at 806 RMB per gram, 806 RMB per gram, and 803 RMB per gram, respectively.
In an on-the-ground visit to several gold stores, we found that most have begun selling gold jewelry according to the new retail price guidelines. With the Double 11 shopping festival approaching, some shops are offering various promotional discounts to attract more customers. For instance, certain brands have initiated price reductions of 20 to 50 RMB per gram, while others are running promotions that offer a 30 RMB rebate for every 2000 RMB spent on gold jewelry.
“Recently, the fluctuations in gold prices have been significant, prompting many customers to place orders quickly once they see a favorable price,” a sales representative from a gold jewelry store in Beijing’s Xicheng District shared. “Investment-grade gold bars have become the primary choice for buyers.”
According to data from the China Gold Association, in the first half of 2024, gold consumption nationwide reached 523.753 tons, with gold jewelry at 270.021 tons, marking a year-on-year decline of 26.68%. Meanwhile, gold bars and coins saw a consumption increase of 46.02%, totaling 213.635 tons. This trend illustrates a divergence in sales, with high-priced gold jewelry seeing a marked decline while lower-priced gold bars and coins experience significant growth. The volatility in gold prices has intensified the operational risks for gold processing and sales companies, leading to a reduction in purchases by wholesalers and a notable drop in processing volumes among jewelry manufacturers.
Financial reports reveal that companies primarily engaged in gold jewelry sales have experienced varying degrees of declines in performance. For example, from July 1 to September 30, Liufu Group reported an overall retail sales drop of 16% year-on-year and a 35% decrease in same-store sales, along with the net closure of 76 locations. Similarly, Chow Sang Sang’s total retail sales for the first half of the year fell by 13%, resulting in the net closure of 22 stores.
Industry experts note that while rising gold prices have increased the retail prices of gold jewelry, the negative impact on sales has been even greater, contributing significantly to the declines in jewelry company performances and store closures. Gold brands need to adjust their sales strategies and offer products more in line with consumer budgets. Additionally, with the rise of online shopping platforms, traditional jewelry stores must also adapt, leveraging online channels to expand their customer base and increase sales opportunities.
Gold has emerged as one of the strongest-performing commodities of 2024, with prices continually setting new records. Wu Zijie, a precious metals analyst at Jinrui Futures, explains that several factors are driving this bullish trend in gold prices: First, unfavorable policies have been largely exhausted. Following the September meeting of the Federal Open Market Committee (FOMC), strong economic employment data from the U.S. has fueled market expectations for a hawkish stance in November, which previously created downward pressure on gold and silver prices. As the marginal expectations for interest rate cuts have turned dovish, the negative impacts from policy have begun to ease. Second, the implied inflation expectations in U.S. Treasury bonds have risen significantly, providing further support for gold prices.
Moreover, the risk of an increasing U.S. fiscal deficit has become a concern. The latest report shows that the budget deficit for the fiscal year 2024 has risen to $1.833 trillion, an 8% increase from the previous year’s $1.695 trillion. This marks the third-highest federal deficit in U.S. history, and projections suggest that the deficit may grow further in 2025. As a form of decentralized “currency,” gold serves as one of the most important tools for hedging against the risks associated with deteriorating sovereign fiscal situations, which contributes to its sustained appeal.
Despite the significant rise in gold prices, international institutions remain optimistic about its future performance. Representatives at the London Bullion Market Association (LBMA) annual conference predicted that gold prices could potentially reach $2941 per ounce within the next 12 months, suggesting a nearly 10% increase from current levels.
On October 21, the Shanghai Gold Exchange issued a notice warning about significant volatility in precious metal prices, indicating a pronounced increase in market risk. They advised member units to refine their risk emergency plans and urged investors to manage their positions prudently and invest rationally.
Wu Zijie emphasizes that, from a medium- to long-term perspective, challenges such as potential sovereign credit crises or inflation risks stemming from de-globalization will continue to pose significant risks to the global economy, which will likely drive gold prices higher. Therefore, gold remains a valuable long-term investment option. However, considering the risks associated with short-term price volatility, investors should avoid stepping in too aggressively.
