On-the-ground investigation of Dragon Boat Festival holiday gold consumption in Shenzhen Shabei: Falling gold prices release urgent demand, wholesalers quickly restock

Recently, gold prices have been continuously adjusting. Reporters visited Shenzhen Shuibei market and multiple branded gold jewelry stores, learning that this year’s “618” combined with the Dragon Boat Festival holiday has warmed up gold consumption, but some consumers are still in a wait-and-see mode of “buying when it goes up, not when it goes down,” choosing to configure in multiple small batches. Upstream wholesalers, meanwhile, seize the price window to complete replenishment across all product categories in a concentrated manner.

Looking back at this year’s gold market, it has been a fierce “roller coaster” ride: at the start of the year, the international gold price surged to a historical peak of $5,598.75 per ounce, then fell rapidly within just a few months to below $4,160 per ounce. As of June 21, gold jewelry prices in Shenzhen Shuibei were about RMB 1,075 per gram, while investment gold bar quotes were RMB 947 per gram. The retail prices of 18K gold jewelry products from leading brands such as Chow Tai Fook were RMB 1,261 per gram; and at this year’s January market high, the gold price per gram in Shuibei had broken through RMB 1,400, while terminal retail prices in brand gold stores once stood above RMB 1,700 per gram.

“In past years, June is usually a traditional off-season for gold jewelry sales, but this year, after prices fell from high levels, orders for weddings and celebrations—driven by rigid demand—clearly picked up. Overall sales revenue was up 5% compared with May,” a person in charge of a gold jewelry shop in Shuibei Gold Exhibition Plaza told reporters. Online channels have also performed impressively. Reporters learned from JD.com that during this year’s “618,” transaction amounts of 17 gold and jewelry brands exceeded RMB 100 million, with brands including Linzhao Jewelry, Lao Feng Xiang, Cai Bai Fine, SaiFeiEr, Mingpai Jewelry, 7000 Year, Shunqing Silver Shop, Potala Palace, KellyShi, and others seeing their transaction amounts double year over year.

Some consumers said they came to buy during the holiday, but they would choose to configure in small batches because “they can’t see the gold price trend clearly.” Compared with the caution of end consumers, wholesalers who have been waiting for a long time have already moved decisively. Multiple Shuibei wholesalers interviewed said that during the period when gold prices had been rising, they had kept inventory under control and did not dare to place big orders. After prices fell recently, they have already launched replenishment across all categories, covering multiple types such as gold jewelry and investment gold bars. “In addition, when gold prices fall, consumers shift to continuous watch-and-wait, and this is also reasonable—after all, most consumers generally tend to buy when prices are rising.”

To tap into the segmented demand of “treating oneself + gift-giving,” many brands have specifically released Dragon Boat Festival-themed gold new products, trying to find new sales growth points in a period of price fluctuations. Industry insiders said gold jewelry enterprises need to be highly alert to operating risks brought by large gold price swings. In the past few years, the franchise expansion model that grew quickly may face dual pressure under the current market conditions: falling gross margins and slower terminal cash collection.

Although the Federal Reserve kept the interest-rate range of 3.50% to 3.75% unchanged at its June meeting, which matched market expectations, the policy statement has clearly shifted toward a hawkish tone. Goldman Sachs has lowered its year-end gold price forecast by $500 to $4,900 per ounce. Citigroup published a research report warning and cut its three-month target price for gold from $4,300 per ounce to $4,000, citing that the standoff in the Strait of Hormuz and high energy prices have boosted market expectations for Fed rate hikes within the year.

However, in the medium to long term, the fundamental logic supporting central banks’ continued gold purchases has not changed. The World Gold Council’s latest annual survey of central bank gold reserves shows that 89% of reserve managers expect that global central bank gold holdings will continue to increase over the next 12 months. Since gold has recently surpassed U.S. government bonds to become the primary reserve asset, this result further confirms that central banks’ demand for gold will keep growing.

【Author: Wu Jiaming】　(Editor: Wen Jing)

Keywords:

                                                            Gold
                                                            Gold price