In recent weeks, the price of gold has soared, breaking historical records by surpassing $2700 per ounce for the first time in historyThis surge in international gold prices has not only affected the global market but has also led to significant increases in retail prices for gold jewelry in ChinaMajor retailers such as Chow Tai Fook, Luk Fook Jewellery, and Chow Sang Sang are now listing their 24K gold jewelry at unprecedented prices, exceeding 800 yuan per gramAs of October 21st, their retail prices are reported to be around 806 yuan, 806 yuan, and 803 yuan per gram, respectively, highlighting a striking trend in gold's value.

To gain insights into this phenomenon, I visited several gold jewelry stores and observed that most outlets have adjusted their prices in accordance with the latest retail guidelinesWith the 'Double Eleven' shopping festival around the corner, many shops have rolled out various promotional campaigns to attract buyers

Some brands are reducing prices by as much as 20 to 50 yuan per gram, while others offer cash-back deals for purchases exceeding 2000 yuan, demonstrating the competitive market dynamics at play.

A sales representative from a jewelry store in Beijing’s Xicheng District noted that the fluctuations in gold prices are causing consumers to act quickly when they perceive a favorable dealAs a result, investment-grade gold bars have become a popular choice among buyers, reflecting a shift in consumer behavior towards more tangible assets amid economic uncertainty.

According to data from the China Gold Association, the quantitative consumption of gold across the nation reached 523.753 tons in the first half of 2024. This includes 270.021 tons attributed to gold jewelry, which marked a significant decrease of 26.68% year-on-yearConversely, the consumption of gold bars and coins experienced a notable increase, totaling 213.635 tons, representing a 46.02% increase compared to the previous year

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This divergence in consumption indicates a growing preference for lower-premium gold products, such as bars and coins, while the appetite for higher-premium gold jewelry is decliningThe volatility in gold prices has introduced substantial risks for gold processing and retail businesses, leading to a reduction in inventory purchases and a decrease in processing volumes for jewelry manufacturers.

The financial reports released from several leading firms highlight the adverse impacts of declining salesFor instance, the overall retail sales for Luk Fook Group from July 1st to September 30th reported a year-on-year decrease of 16%, with same-store sales hitting a troubling decline of 35%, resulting in the net closure of 76 storesSimilarly, Chow Sang Sang also faced setbacks, with a 13% drop in overall retail sales for the first half of the year and the closure of 22 stores.

Industry experts emphasize that while the rising gold prices have elevated the unit price of gold jewelry, the negative impact on sales volumes outweighs the benefits

This adverse trend is one of the key reasons behind the reduced performance of gold jewelry companies and the closure of retail storesExperts suggest that gold brands must adapt their sales strategies, introducing more products that align with consumer budgetsSimultaneously, the rise of online shopping platforms makes it essential for traditional gold stores to consider digital transformations, leveraging the internet to widen customer reach and enhance sales opportunities.

Gold is currently recognized as one of the most robust commodities in 2024, with record-breaking price levelsAccording to analysts from Jinrui Futures, several factors are driving the strength of gold pricesFirstly, unfavorable policy impacts have reached their peakFollowing the September meeting of the U.SFederal Open Market Committee (FOMC), a series of strong economic data released by the U.Shas led markets to adopt a hawkish stance for November, which had previously exerted downward pressure on gold and silver prices

Yet, expectations of interest rate cuts are beginning to manifest, softening the adverse effects of policy changes on gold prices.

Moreover, concerns surrounding the increasing risk of the U.Sfiscal deficit are also contributing to the attractiveness of gold as an investmentRecent reports indicate that the U.Sbudget deficit for the fiscal year 2024 could rise to $1.833 trillion, an increase of 8% from the previous year’s deficit of $1.695 trillionThis situation marks the third highest federal deficit in U.Shistory, and projections suggest it may further escalate by 2025. As a de-sovereignized form of currency, gold serves as a crucial instrument for hedging against the risks associated with deteriorating sovereign fiscal health, reinforcing its position in the market.

Even amid these substantial price rises, international institutions remain optimistic about gold's future outlook

At the annual meeting of the London Bullion Market Association (LBMA), representatives predicted that gold prices could reach $2941 per ounce in the coming year, implying a potential increase of nearly 10% from current levels.

On October 21st, the Shanghai Gold Exchange issued a notice highlighting the significant recent fluctuations in precious metal prices and the heightened market risksThey advised member units to refine their risk emergency plans and urged investors to control their positions wisely and invest rationally.

From a medium- to long-term perspective, analysts like Wu Zijie believe that challenges such as credit crises facing sovereign nations and inflationary risks arising from a trend towards de-globalization will continue to propel gold prices upward, attesting to its enduring value as a long-term investment assetHowever, they warn investors to refrain from chasing after short-term price spikes to mitigate the risks associated with volatility.