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"only more than 10 customers came in the whole morning," a shanghai gold shop owner told the reporter of the national business daily on september 14. in his opinion, the record-breaking gold prices are making it out of reach for more and more consumers.

data shows that as of the close of the european and american trading sessions on september 13 local time, the london spot gold trading price closed at us$2,579.1 per ounce, setting an intraday all-time high of us$2,585.97 per ounce.

image source: tonghuashun ifind

domestic jewelry gold prices soared to 762 yuan per gram

gold shops are deserted

affected by the international gold price, the price of gold jewelry in domestic gold shops has risen rapidly. the reporter of "daily economic news" noted that according to the gold investment network, as of september 14, the gold prices of chow tai fook, lao feng xiang, chow sang sang jewelry, and luk fook jewelry were 758 yuan per gram, and chow sang sang's gold price was 762 yuan per gram.

image source: jintou.com

as for offline stores, the owner of the gold shop pointed out to the reporter, "even though we made concessions on the processing fee for gold jewelry and reduced the actual price of gold jewelry to around 680 yuan per gram, there were still only a handful of customers who actually bought gold jewelry. among the more than 10 customers in the gold shop this morning, at least 80% were scared by the high gold price."

he looked around other gold shops in the same mall and found that they were also "empty". faced with this situation, he has considered "closing the shop" at the end of the year for transformation. in fact, the record high gold price is having an increasingly significant impact on the layout of gold shops of downstream gold companies.

image source: photo by reporter chen zhi

on the corporate side, some companies' retail performance has also declined. for example, chow tai fook (01929.hk) recently released its latest financial report showing that from april to june, chow tai fook's jewelry retail value in the chinese mainland market fell 18.6% year-on-year, while the retail value in hong kong, china, macau and other markets fell 28.8% year-on-year.

image source: chow tai fook financial report

in addition, same-store sales of chow tai fook jewelry's direct stores and franchise stores have all declined by double digits. the financial report shows that in the first half of this year, the number of chow tai fook stores in the mainland decreased by 180.

the reporter learned that chow tai fook is planning to further optimize the layout of gold shops to cope with the challenges of high gold prices and economic cycle fluctuations. it is worth noting that the impact of record high gold prices on the physical gold industry is rapidly extending from downstream gold shop sales to midstream gold jewelry processing.

image source: chow tai fook financial report

an operations director of a gold jewelry processing company in shenzhen told reporters, "in the past, before the mid-autumn festival and national day, a large number of downstream gold shops would purchase a large number of new gold jewelry in advance. but now, the number of downstream gold shops willing to stock up has dropped significantly."

it is worth noting that the high gold price has led to poor sales of downstream gold shops, and has also significantly reduced the purchase of gold jewelry. he told reporters that even if some downstream gold shops are still willing to purchase and stock up, they are mainly "gold beans" products with lower customer unit prices and "fixed price" gold jewelry, and the amount of gold jewelry stocked by these gold shops has dropped by more than 50% compared with the past.

in order to quickly digest the gold inventory in his hands, he rented another gold sales counter in shuibei district of shenzhen in the second quarter, and reduced the processing fee of gold jewelry to 10-20 yuan/gram, hoping to reduce the average customer unit price of gold jewelry to around 630-640 yuan/gram and clear out the backlog of gold inventory as soon as possible.

"if the purchase price of this batch of gold inventory was not around 500 yuan/gram (there is still a certain amount of gold price increase corresponding to the current gold price), i would never dare to lower the processing fee and reduce inventory to activate funds." the operations director of a gold jewelry processing company in shenzhen told reporters. but what he didn't expect was that due to the record high gold prices and economic cycle fluctuations, the passenger flow in shuibei area has decreased accordingly, causing his gold inventory digestion cycle to be slower than he expected.

domestic demand for gold jewellery was only 86 tonnes in the second quarter

gold jewelry processing companies quietly "exit"

wang lixin, ceo of world gold council china, said in an exclusive interview with reporters that, normally, if the gold price fluctuates within a certain range for a period of time and shows an upward trend, consumers' willingness to buy gold jewelry will recover; but the recent gold price has fluctuated relatively violently in the process of setting new highs, causing consumers to be afraid to "take action" because they are worried that they will buy at a "high price" and suffer losses once the gold price falls sharply.

the report "review and trend analysis of china's gold market in the second quarter of 2024" released by the world gold council shows that the demand for gold jewelry in the chinese market in the second quarter was only 86 tons, a decrease of 35% from the same period last year and a decrease of 53% from the first quarter. correspondingly, china's gold jewelry consumption in the first half of this year fell by 18% year-on-year to 270 tons. behind this, the continued rise in gold prices and the slowdown in economic growth have led to a decline in consumer purchasing power, which in turn has suppressed gold jewelry consumption.

domestic market demand for gold jewellery in the first half of 2024 image source: world gold council

the report also pointed out that the surge in gold prices and the slowdown in economic growth were the main factors that hindered consumers from buying gold jewelry in the first half of the year. in march, the domestic gold price soared by 10%, breaking the healthy trend of gold jewelry consumption since the beginning of 2024; while in april and may, gold prices continued to rise and set new highs, coupled with the slowdown in china's economic growth, consumers' gold purchasing power fell to the lowest point since 2013.

"this is also a fundamental factor for the sudden increase in business pressure since may." the operations director of the above-mentioned shenzhen gold jewelry processing company said frankly. since may, he has increasingly felt that downstream gold shop customers have been "complaining" about the increasingly bleak sales, and their willingness to purchase and stock new gold jewelry has continued to decline.

at present, he can only accept some orders for investment gold bars that are processed with supplied materials, and no longer engages in any self-operated business (first purchasing gold raw materials and designing and processing them into new gold jewelry, and then selling them to downstream gold shops at market prices). although the processing fees for such orders are relatively meager, they can barely cover the company's operating expenses.

"however, in the second half of the year we have asked some employees to take a vacation for a period of time and wait for downstream orders to recover before coming back to work." the operations director of a gold jewelry processing company in shenzhen told reporters.

similar stories are increasingly common in the gold processing industry chain this year. in may, chow tai fook's factory in shenzhen stopped production, which once attracted attention from the gold market. chow tai fook said that this move was to improve the group's operating efficiency and relocate some of its production departments in shenzhen to its factory in shunde, guangdong. this adjustment will not affect the group's business.

image source: chow tai fook financial report

the operations director of the aforementioned shenzhen gold jewelry processing company pointed out, "we now hope that the macro-economy will further improve as soon as possible. in addition, the fluctuation range of gold prices will be reduced in the future, which will release the rigid consumption demand of gold jewelry to a certain extent, and promote the recovery of both downstream gold shops and midstream gold jewelry processing industry chains."

global gold etfs saw a net inflow of us$2.1 billion in august

my country's gold etfs see net outflow of funds

in contrast to the surge in sales pressure in the gold jewelry industry, the record-high gold prices are fully demonstrating the "money-making effect" of gold etfs.

affected by the record high global gold prices on september 13, for example, the net value of boshi gold etf link a increased by 1.21% on that day. since the beginning of this year, affected by the continuous rise in gold prices, the yield of this gold etf has reached 19.92%, and the yield in the past month has reached 2.36%.

image source: tonghuashun ifind

a person from a fund company's gold etf revealed to reporters that during the period when gold prices hit new highs on september 13, a lot of new funds still entered the market to increase holdings of gold etfs because they expected that gold prices would continue to hit new highs in the future and create a higher "money-making effect."

aakash doshi, head of north american commodities at citigroup's research department, said that by mid-2025, the price of gold may reach $3,000 per ounce and by the end of 2024 it may reach $2,600 per ounce. the rise in gold prices will be driven by factors such as us interest rate cuts and strong etf investment demand.

image source: tonghuashun ifind

it is worth noting that as gold prices continued to rise this year, the inflow of funds into domestic gold etfs has also surged.

the report "review and trend analysis of china's gold market in the second quarter of 2024" released by the world gold council shows that during the second quarter, my country's gold etf market had a cumulative inflow of about 14 billion yuan, setting a record high. throughout the first half of the year, china's gold etf market maintained a continuous monthly inflow of funds, with a cumulative inflow of about 17 billion yuan, not only setting the strongest first half performance in history, but also exceeding the annual demand in previous years.

however, as the price of gold hit a new historical high, some investors seemed to have begun to choose to "take profits."

on september 6, the world gold council released its latest monthly report showing that in august, global gold etfs had a net inflow of us$2.1 billion. however, in that month, gold etfs in the chinese market saw a net outflow of funds, ending the previous eight consecutive months of net inflows.

the person in charge of the gold etf of the aforementioned fund company told the reporter that the reason was that the correction in bond prices since august had caused the net value of bank wealth management products to fall, causing some investors to worry about the investment risks of financial products, so they simply chose to sell the profitable gold etf to "lock in profits."

however, he also pointed out that "as gold prices continue to hit new highs to bring a 'money-making effect' to gold etfs, coupled with the increased volatility of equity markets and the limited future growth of the net value of fixed-income financial products, many investors will continue to increase their gold etf allocations in the future as an investment strategy that takes into account both risk-averse investment and higher excess returns."