Gold Hits Record High, Jewelry Over 760 Yuan/Gram; Fear of Heights Leads to Downward Trend in Gold Consumption

On September 23rd, the main gold futures contract on the Shanghai Futures Exchange reported a price of 595.14 yuan/gram, with a gain of 1.39%, continuing to set a new historical high, having risen by over 20% so far this year.

In the overseas market, the London gold price once broke through 2,631 US dollars per ounce during the trading session, setting a new record high.

"The Federal Reserve's interest rate cut in September slightly exceeded expectations, boosting the short-term rise in gold," said securities analyst Fu Honghao.

Fu Honghao believes that from the dot plot, it can be seen that the FOMC expects the interest rate center in 2025 to be 3.25%, and 2.75%-3.00% in 2026. Therefore, it can be expected that there is still a large room for interest rate cuts later, and the gold price in the future is still worth looking forward to.

Gold jewelry prices remain high

On September 23rd, according to the inquiry by the reporter of Nan Cai Kuai Xun, the price of Chow Sang Sang's pure gold jewelry is reported to be 768 yuan/gram; Chow Tai Seng's pure gold 999 is reported to be 767 yuan/gram, and the gold bar is reported to be 767 yuan/gram; Zhou Liu Fu's pure gold 999 is reported to be 767 yuan/gram, and pure gold 999.9 is reported to be 787 yuan/gram, all remaining above the high level of 700 yuan/gram.

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However, the stock prices of gold jewelry stores represented by Chow Tai Seng (002867.SZ) and Lao Feng Xiang (600612.SH) have not set new highs, but have回调 significantly compared to the stock prices in April this year.

The reporter called Lao Feng Xiang as an investor, and the relevant person said that the rise in gold prices is beneficial to mining, but the company belongs to the commodity trade manufacturing and distribution industry, and gold raw materials need to be purchased from the exchange, and cannot stock too much goods, and costs rise with the rise in raw material prices.

Regarding the decline in gold jewelry retail sales, the person said that as gold prices rise, consumers think the prices are too high, and may (wait and see) no longer buy, which puts pressure on the retail terminal.Chaos Tiancheng Research also pointed out that with the continuous rise in gold prices, the consumption of gold jewelry in the market is indeed on a downward trend.

The institution said that from China's consumption data in the past five years, it can be seen that gold consumption has shown a significant decline in the second quarter, but it is worth noting that global gold bar consumption has shown a significant upward trend, and the demand for physical investment has replaced consumer demand as a trend, thus offsetting some of the adverse effects brought about by the decline in gold consumption.

Gold mining listed companies also mentioned the impact of rising gold prices. Chifeng Gold stated that gold is the company's main product, and the gold price will have a positive impact on the company's sales revenue. Shandong Gold stated that the rise in gold prices has a positive effect on the company's profits.

However, Shandong Gold also stated that the company's profits are also affected by multiple factors such as ore grade, mining depth, gold production, production arrangements, and production costs.

Why did the gold price reach a new high?

Zhao Wei, the chief economist of Shenwan Hongyuan Securities, said on the 22nd that the gold trend since the beginning of the year can be divided into three stages:

1) January 1 - April 17, the gold price soared by 14%;

2) April 18 - June 25, gold consolidation and a 2% decline;

3) From June 26 to September 22, gold once again soared and rose by 13%.He analyzed that the first wave of the rise might have been driven by central banks' gold purchases; recently, the release of investment demand following the decline in U.S. Treasury yields has been the main reason.

1) In the first quarter of 2024, global central banks collectively purchased 300 tons, accelerating compared to the fourth quarter of last year.

2) Since June 10th, the actual interest rate of the 10-year U.S. Treasury bond has fallen by 58 basis points, releasing gold investment demand; as of September 17th, the net long position in gold for non-commercial purposes has increased to the 99.4th percentile.

Regarding the market's concern about the high price of gold, Zhao Wei said it might be due to worries about the divergence between gold prices and real interest rates; this gap might be caused by central banks' gold purchases. Under the traditional framework, investment demand dominated by inflation and opportunity costs determines the price of gold; since 2022, the significant increase in central banks' gold purchases has shifted the demand curve outward, leading to a widening gap between gold prices and real interest rates. After including central banks' gold purchases, the central price of gold might be around $2,323 per ounce.

It should be noted that "the market's sentiment towards gold has gradually increased, with Comex gold holdings repeatedly reaching new highs, the long position is quite crowded, while the short position has dropped to a low point, which is something the market needs to be wary of." Chaos Tiancheng Research stated that, along with the potential liquidity risk in the United States, changes in gold speculative positions and sales could potentially form short-term fluctuations in a large cycle, followed by a buildup for the next upward movement.

As for the domestic situation, Zhao Wei said that currently, China's gold allocation might be crowded, but whether it will shift still needs to focus on changes in economic expectations. The surge in domestic gold investment demand might be driven by the allocation needs stimulated by the poor performance of other assets such as the stock market.