On-site investigation of Shenzhen Shuibei gold consumption during the Dragon Boat Festival holiday: The fall in gold prices releases immediate demand, wholesalers quickly restock

Recently, gold prices have continued to adjust. Reporters visited the Shenzhen Shuibei market and several branded jewelry stores, learning that this year “618” combined with the Dragon Boat Festival holiday has warmed up gold consumption somewhat. However, some consumers are still in a wait-and-see mindset of “buy when the price is rising, not when it is falling,” choosing to allocate purchases in small batches. Upstream wholesalers, meanwhile, have seized the pricing window to complete replenishment across all categories in a concentrated manner.

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

“A couple of years past, June is usually a traditional off-season for gold jewelry sales, but this year, after the price dropped from a high level, demand for wedding-related rigid needs clearly rebounded. Overall sales revenue is up 5% compared with May,” a person in charge of a gold jewelry store in Shuibei Gold Expo Plaza told reporters. Online channels have also performed strongly. Reporters learned from JD.com that during this year’s “618,” the成交额 of 17 gold and jewelry brands exceeded 100 million yuan. Brands including Linchao Jewelry, Lao Feng Xiang, Caibai Gold & Jewelry, Saifeier, Mingpai Jewelry, 7000 Years, Shunqing Silver Shop, Potala Palace, Kailixi, and others saw their成交额同比 growth double.

Some consumers said they came to shop ahead of the holiday, but would choose to purchase in small batches because they “can’t make sense of the gold price trend.” Different from the cautious terminal consumers, wholesalers who have been waiting for a long time have already moved decisively. Several Shuibei wholesalers interviewed said that during the period when gold prices had been rising continuously, they had been controlling inventory and not daring to place large orders. After prices recently fell, they have already started replenishment across all categories, covering multiple categories such as gold jewelry and investment gold bars. “In addition, the decline in gold prices has led consumers to shift to continuous waiting, which is also understandable—after all, most consumers generally prefer to buy when prices are rising.”

To tap into the segment demand of “treating yourself + gifting,” many brands have specifically launched Dragon Boat Festival-themed new gold products, trying to find new sales growth points during periods of price volatility. Industry insiders said gold and jewelry companies need to be highly alert to business risks brought by large swings in gold prices. In recent years, the fast-expansion franchise model may face dual pressures under the current market conditions: falling gross margins and slower terminal cash collection.

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

However, in the medium-to-long term, the fundamental support logic of global central banks’ continued gold purchases has not changed. According to the latest annual survey of central bank gold reserves released by the World Gold Council, 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 top 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