Amid the continuing volatility of international gold prices, the domestic gold prices in China have been steadily declining. On June 6th, the owner of a gold shop in Changsha, Hunan, lamented, “I woke up to see my assets shrink by 3 million yuan.”
According to a report by Caixin on June 6th, as international gold prices fell below $4400 per ounce, prices of domestic branded gold jewelry also dropped accordingly. The prices of gold jewelry from brands like Chow Tai Fook, Lao Feng Xiang, and Lao Miao Gold have all seen a 23% decline compared to their highs this year.
Mr. Peng, the owner of a gold shop in Changsha, Hunan, shared that his inventory includes a large amount of gold bars and jewelry. With the international gold prices plummeting by around 30 yuan per gram in a single day, the domestic gold prices also experienced a sharp decline, causing his recorded assets to shrink by 3 million yuan overnight.
Several branded gold shops saw their prices for 24K gold jewelry drop by over 30 yuan in a single day, with brands like Chow Tai Fook quoting prices around 1315 yuan per gram, and the local price in Changsha dropping to 940 yuan per gram.
Mr. Peng expressed his despair over the unprecedented magnitude of the current gold price drop, noting that the market has turned at an extremely fast pace, far beyond market expectations, making him keenly feel the intense fluctuations of the precious metal market.
Mr. Peng not only faced huge losses in the gold bars and jewelry in his inventory but also suffered significant losses from unfulfilled orders. For instance, an order for a 50-gram gold bracelet resulted in a direct loss of 5000 yuan due to the sudden plunge in gold prices. These seemingly small order losses, combined with the substantial devaluation of his multi-million inventory, have significantly increased the operational pressure on his store.
Earlier this year, driven by geopolitical risk hedging needs, central bank gold purchases, and other factors, international gold prices surged to historic highs, surpassing $5600 per ounce. However, entering June, factors such as the strengthening of the US dollar, rising US bond yields, and a global preference for risk-on sentiments have led to a rapid pullback in gold prices.
On June 5th, international spot gold fell to around $4331 per ounce, with a daily decline exceeding 3%. The domestic market in China followed suit, with prices of varieties like Au9999 on the Shanghai Gold Exchange also experiencing significant declines.
According to industry insider “Eastern Hero,” in the past few months, the gold market has been on an upward trend, with a surge in gold buying and hoarding fever among the public, leading to a continuous increase in gold jewelry and investment bar sales. Many gold merchants took advantage of this trend to heavily stock up, accumulating a large inventory to seize market opportunities, generally maintaining an optimistic outlook on the gold price trend.
However, the sudden turnaround in the market has turned the high-level inventory into a “hot potato.” Now, with strong consumer cautiousness, even with gold shops reducing selling prices and waiving workmanship fees, foot traffic has significantly decreased, leading to a cold spell in sales.
The fluctuation in gold and silver prices not only affects gold shop owners but also impacts ordinary investors. Some individuals and families who hoarded gold at high prices are now facing asset shrinkage.
Experts warn that gold is not a risk-free asset, market volatility is normal, blindly following trends and heavily betting on one-sided market trends can lead to losses. Investors should combine their risk tolerance, make rational allocations, and avoid emotional hoarding.