【MACRO Alert】Market reaction and retailer strategy adjustment in the context of soaring gold prices

The soaring gold price has made many consumers who intend to buy gold feel burdened. In July last year, Chow Tai Fook bought a set of gold jewelry at a price of 592 yuan per gram. However, in September this year, when he visited the same brand again, he found that the gold price had soared to 767 yuan per gram. By October 25, the price of gold jewelry from brands such as Chow Tai Fook was as high as 806 yuan per gram, which shocked Lin Sheng.

Since the beginning of this year, the international gold price has hit new highs. As of 4:30 p.m. on October 25, the COMEX gold price reached US$2,738 per ounce, and the London spot gold price was US$2,721.52 per ounce. The year-to-date increases have both exceeded 31%.

During the “Double 11” period, e-commerce platforms usually attract consumers to buy gold jewelry, but this year's enthusiasm for buying seems to have weakened. According to data from the Shenzhen Gold, Silver and Jewelry Creative Industry Association, on the first day of pre-sale for this year's “Double 11”, the sales of 15 brands including Laopu Gold, Lao Miao, Mengjinyuan and Saifeier doubled year-on-year.

Despite this, the high gold price has begun to affect consumers' willingness to buy, and the profit margin of gold retail is also shrinking. Some consumers choose to sell their gold jewelry and invest in the stock market, some choose to wait and see the market, and some begin to pay attention to gold substitutes. During the “Double 11” period, the craze for gold purchases has subsided. A gold jewelry enthusiast has bought branded gold jewelry many times in the past year at a price of 600 to 650 yuan per gram. But on this year's “Double 11”, she gave up the pure gold necklace she originally planned to buy because the price was beyond her expectations.

Therefore, for many anchors, selling pure gold products has become an increasingly unprofitable business. He revealed: “Nowadays, many of the live broadcasts selling gold are paying for traffic.” At the same time, the high price of gold has also given rise to the rise of a “substitute” business. On social platforms, there are more than 300,000 notes on the keyword “gold wrapped in silver”. These popular gold-wrapped silver jewelry are almost the same as pure gold jewelry in appearance, but the main part is made of silver and the outer layer is plated with a layer of pure gold.

Since the price of silver is much lower than that of gold, the price of gold-plated silver products is usually only one-tenth of that of pure gold products of the same specifications. For example, a gold-plated silver plain bracelet sold by a jewelry store on Douyin weighs about 25 grams, with a gold weight of about 1.6 grams and a retail price of 1,150 yuan. If calculated based on the gold market price of 620 yuan per gram on October 25, a 25-gram pure gold bracelet would cost about 15,000 yuan without labor costs.

The rise in international gold prices has also hit a record high, with an increase of more than 31% so far this year. This trend has not only affected the domestic gold market, but also had a chain reaction on the global investment and retail markets. During the traditional shopping carnival of “Double 11”, the enthusiasm for gold purchases unexpectedly weakened. Although the promotional activities of e-commerce platforms still attract consumers' attention, the soaring gold price has exceeded the expectations and purchasing power of many people, causing them to postpone or cancel their plans to buy gold.

Some consumers choose to sell their gold jewelry and invest their funds in the stock market or other investment channels. At the same time, some consumers have begun to pay attention to gold substitutes, such as gold-clad silver jewelry, which is similar in appearance to pure gold jewelry but has a lower cost, so it has been popular in the market. The gold retail market is also facing a shrinking profit margin. As gold prices rise, retailers' costs increase, while consumers are also becoming more price sensitive, forcing retailers to find new ways to maintain profits, such as by providing differentiated products or value-added services.

Some retailers began to reduce inventory, shrink high-margin jewelry categories, and improve product craftsmanship and differentiation to adapt to market changes. The rise of the gold-plated silver jewelry market is a reflection of this strategic adjustment. It not only meets consumers' demand for cost-effectiveness and fashionable appearance, but also demonstrates the flexibility and innovation of gold retailers in the face of market changes.

Overall, the surge in gold prices has had a profound impact on the market, but it also provides retailers with opportunities to adjust and innovate. As the market continues to change, retailers must maintain keen market insight to adapt to these changes and continue to attract consumers.