On September 14th, the international spot gold price continued to reach historic highs. Meanwhile, the gold market in mainland China is experiencing both good times and bad. Financial reports from top-tier brand Chow Tai Fook revealed that after a net closure of 89 stores in the first quarter in the Chinese market, another 91 stores were closed in the second quarter, totaling a reduction of 180 stores in just half a year, averaging one closure per day. At the same time, other jewelry companies are also facing tough times.
The international gold price hitting new highs has sparked discussions related to gold across the internet. Netizens expressed their sentiments, with some saying, “I’m considering selling the necklace I bought a few months ago,” “When will the prices drop a bit?” and “It’s really too expensive.”
Since March this year, the price of gold in mainland China has risen by 20% in just over a month, nearly reaching the increase for the entire previous year. Subsequently, the gold price has been fluctuating between 560 yuan and 580 yuan per gram, while the gold price in stores hovers around 740 yuan per gram.
On the other hand, the gold stores are facing a cold spell. According to Chow Tai Fook’s semi-annual report, from April to June, the retail value of the well-known brand Chow Tai Fook decreased by 20% year-on-year, with an expected 18.6% decline in retail value in mainland China and a 28.8% decline in Hong Kong, Macau, and other markets. Additionally, from April to June this year, Chow Tai Fook’s jewelry stores in mainland China saw a net closure of 91 stores. In the first quarter of this year, 89 stores in the mainland market were closed. This indicates that in just half a year, Chow Tai Fook has reduced 180 jewelry stores in mainland China, averaging one closure per day.
The operating data for the months of April to June from Lukfook Group showed an overall 23% year-on-year drop in retail income, with a 31% year-on-year drop in retail income in the Hong Kong and Macau markets and a 3% drop in the mainland China market. Regarding store numbers, Lukfook Group saw a net decrease of 99 global stores in the quarter, with a net decrease of 102 stores in mainland China.
Reported by Hunan Daily on September 15, in a high-end mall in Hangzhou, a row of desolate gold stores reflects this “cold spell.” During the weekend, the salespeople in these gold stores stood at the entrance chatting or greeting passing customers.
Song Cheng (pseudonym), the manager of a branded franchise store, operates two gold stores in Jiaxing and Hangzhou. He mentioned that in previous years, the May Day holiday, Mother’s Day, and Chinese Valentine’s Day were peak seasons for gold sales. Before 2019, it was normal to sell tens of thousands or hundreds of thousands in a day when the market was doing well. “In previous years, during the half-month period around May Day, sales usually reached four to five million, but now we can barely make a sale, not even reaching a million,” said Song Cheng.
According to statistics from the China Gold Association, in the first half of 2024, the consumption of gold jewelry, which had performed well previously, decreased by 26.68% year-over-year.
Zhou Yongcheng, Chairman and CEO of Chow Sang Sang Group, also mentioned at a recent shareholder meeting that due to the rapid rise in gold prices, it restrained consumers’ willingness to spend, resulting in lower-than-expected sales this year.
“For gold jewelry, gold is the raw material. If the gold price only slightly rises, consumers may consider buying jewelry as an investment. But once the price reaches 700 yuan per gram, the jewelry price significantly exceeds consumers’ expectations, leading to a sharp decrease in sales,” said Song Cheng.
The investigation found that the prices of most gold brands are usually 20% to 30% higher than the international gold price, with additional processing fees added to the jewelry’s price. Each gold brand has different processing fees, making the jewelry prices generally 60 to 100 yuan per gram higher than the store’s gold price. With subdued gold jewelry consumption, the profits of gold stores have been greatly squeezed.
Poor sales have led to the closure of some physical stores. China Business News reported that due to poor sales performance in the last half year, some brand jewelry stores in Shenzhen’s Luohu District have chosen to shut down.
Topics related to gold have attracted a lot of attention from netizens.
User “SnowBeautyMelon12” commented, “Are consumers hesitant, or is the demand weak? Let’s see the Consumer Confidence Index, which can explain why gold stores are quiet.”