Recently, both spot gold and COMEX gold futures have broken through historical highs, surpassing the $2,700 per ounce mark for the first time. As international gold prices continue to rise, the prices of pure gold jewelry in domestic gold shops have also reached new highs, with the highest prices breaking through 800 yuan per gram. As of October 21st, the retail prices for pure gold jewelry at Chow Tai Fook, Luk Fook Jewelry, and Chow Sang Sang were 806 yuan per gram, 806 yuan per gram, and 803 yuan per gram, respectively.
Reporters visited some gold stores and learned that most stores have been selling gold jewelry according to the latest retail guidance prices. As "Double 11" approaches, some shops have launched promotional activities of varying degrees to attract more consumers. For example, some brands have offered discounts ranging from 20 to 50 yuan per gram, while others have introduced promotions such as a 30 yuan rebate for every 2,000 yuan spent on gold jewelry.
"Gold prices have fluctuated significantly recently, and many customers will place orders quickly after seeing a suitable price," said a salesperson at a gold jewelry store in Xicheng District, Beijing. Investment-type gold bars have become the main purchase choice for customers.
According to data from the China Gold Association, the national gold consumption volume in the first half of 2024 was 523.753 tons, of which gold jewelry accounted for 270.021 tons, a year-on-year decrease of 26.68%; gold bars and coins accounted for 213.635 tons, a year-on-year increase of 46.02%. This trend reflects a divergence in the sales of gold jewelry and gold bars and coins. Consumption of high premium gold jewelry has significantly decreased, while consumption of relatively low premium gold bars and coins has increased sharply. The sharp fluctuations in gold prices have increased the production and operation risks for gold processing and sales enterprises, leading to a reduction in the purchase volume of wholesale and retail enterprises, and a significant decrease in the processing volume of jewelry processing enterprises.
From the published financial reports, it can be seen that the performance of enterprises with gold jewelry as their main business has declined to varying degrees. For example, from July 1st to September 30th, Luk Fook Group's overall retail sales decreased by 16% year-on-year, same-store sales decreased by 35% year-on-year, and the number of stores net decreased by 76; Chow Sang Sang's overall retail sales in the first half of the year decreased by 13% year-on-year, and 22 stores were closed.
Industry experts point out that although the rise in gold prices has increased the unit price of gold jewelry, the negative impact on sales volume is greater, which is one of the main reasons for the decline in performance and store closures of gold jewelry enterprises. Gold brands need to adjust their sales strategies and introduce more products that meet consumers' budgets. At the same time, with the rise of online shopping platforms, traditional gold shops also need to transform and upgrade, use online channels to expand customers, and increase sales opportunities.
Gold, as one of the strongest performing commodities in 2024, continues to set new price records. Wu Zijie, a precious metal analyst at Jinrui Futures, analyzed that the strong gold prices are mainly driven by the following factors: First, policy bearish factors have been exhausted. After the September FOMC meeting, the overall strong economic employment data released by the United States has driven the market's expectations for November to continue to turn hawkish, which has formed a clear suppression on the prices of gold and silver. As the recent interest rate cut expectations have begun to turn dovish at the margin, the bearish impact of the policy side has gradually weakened. Second, the current U.S. Treasury implied inflation expectations have risen significantly, and gold prices have also been supported by this.
In addition, the risk of the U.S. fiscal deficit has intensified. The latest report shows that the U.S. budget deficit for the fiscal year 2024 has increased to $1.833 trillion, an increase of 8% from $1.695 trillion in the fiscal year 2023. This is the third-highest federal deficit in U.S. history, and the fiscal deficit in the United States may further expand in 2025. Gold, as a de-sovereignized "currency," is one of the most important tools to hedge against the risk of sovereign countries' fiscal deficit deterioration, and thus is supported.
Despite the recent significant rise in gold prices, international institutions still have a positive outlook for its subsequent performance. At the annual conference of the London Bullion Market Association (LBMA), representatives predicted that gold prices are expected to rise to $2,941 per ounce in the next 12 months, which means there is still an increase of nearly 10% compared to the current gold price level.
The Shanghai Gold Exchange issued a notice on October 21st, stating that the price fluctuations of precious metals have recently increased significantly, and market risks have obviously intensified. It reminds all member units to refine emergency plans for risks and advises investors to reasonably control positions and invest rationally.Wu Zijie believes that, from a medium to long-term perspective, both the credit crisis of sovereign states and the inflation risks brought about by deglobalization are challenges that the global economy will face in the long term, which will continue to drive up the price of gold. Therefore, gold still has good long-term investment value. However, considering the risks of short-term price fluctuations, investors should avoid blindly chasing high prices.