"Disappearing Gold" Incident Tracking: Why is the Gold Investment Chaos Frequent Occurring?

Recently, the news of the closure of the China Gold R&F Plaza store in Chaoyang District, Beijing has attracted attention. The store is a franchise store of China Gold, where many consumers handle gold custody business all year round, and the closure of the store has caused varying degrees of property losses.

On April 1, China Gold Group Gold & Jewelry Co., Ltd. (CICC Jewelry) publicly responded, stating that it would advance payments to relevant consumers and would strengthen access control and supervision and management of franchise business.

Behind the "disappearing gold", what industry chaos is highlighted, and how can gold investment avoid "stepping on the pit"? The reporter conducted an investigation.

CICC Jewelry: A special team has been set up to make advance payments

Recently, some consumers have reported that the China Gold R&F Plaza store has withdrawn and lost contact, and the gold in custody cannot be retrieved.

A citizen surnamed Wang said that she bought 230,000 yuan worth of physical gold at the store in 2016, and at that time, the store provided a gold custody service, and returned 10 grams of "deposit interest" for every 400 grams of gold a year. In February this year, when Ms. Wang wanted to renew her deposit, she found that the store had been closed.

A number of consumers have experienced similar situations. What makes them "step on the pit" is a custodian business called "gold bar worry-free reservation": after paying the one-time payment, they do not take the gold bars but are held in escrow by the gold store, and they can reduce a certain fee per gram when purchasing, and they can also return some gold products as "deposit interest" in proportion.

It is understood that after the gold store involved suddenly closed, some consumers reported the case, and some consumers managed gold for a lot of money. At present, Yang Moumou, the actual controller of the franchised gold store, has been criminally detained by the public security organs, and the case is still being further handled.

On April 1, CICC Jewellery issued an announcement in response, stating that it would advance payment to relevant consumers in advance, and would strengthen access control and supervision and management of franchise business.

On April 2, in a further reply to reporters, CICC Jewelry said that it had set up a special team and set up a number of working groups, and the staff was working on the advance payment. The reporter learned from a consumer who defended his rights on the 3rd that on the evening of the 2nd, consumers had been notified to go through the relevant procedures.

In addition, when the reporter visited a number of China Gold franchise stores in Beijing on the 2nd, it was found that these stores had put up posters in conspicuous positions, reminding that "the brand does not carry out any form of product storage services, does not carry out any form of sale and leaseback and other fund-raising or derivative financing business".

Highlight the chaos of illegal business and franchise management

Industry insiders believe that the gold custody business of the above-mentioned Chinese gold franchise stores already has certain financial attributes, which is equivalent to carrying out gold asset management business under the banner of gold custody.

According to the Notice on Matters Related to Gold Asset Management Business issued by the General Office of the People's Bank of China in December 2018, gold asset management business refers to financial services in which financial institutions such as banks, trusts, securities, funds, futures, insurance asset management institutions, and financial asset investment companies accept the entrustment of investors and invest their entrusted investors' assets in physical gold or gold products. Gold asset management products can only be initiated and established by financial institutions.

At the same time, the physical gold invested in gold asset management products shall be registered and deposited, and the registration and custody services shall only be provided by financial institutions and gold trading venues approved by the State Council and financial regulatory authorities, such as the Shanghai Gold Exchange.

"The gold store is not a financial institution and does not have the qualifications to carry out gold custody business. Zhang Yipeng, a lawyer at Beijing Yifa Law Firm, said.

The relevant person in charge of CICC Jewellery also said that the "worry-free gold bar booking" business carried out by the gold store involved without authorization was an unauthorized business that CICC Jewellery expressly prohibited.

Industry insiders believe that the problems of illegal operation and store closure and running away in China's gold franchise stores also show that the daily management and regular supervision of the franchise stores are lacking, and the internal control system is not perfect.

In recent years, a number of brands, including China Gold, have expanded their business through franchise stores. According to CICC Jewellery's 2022 annual report, as of 2022, 3,642 stores have been opened, of which 3,537 are franchised stores and only 105 are directly operated stores. The company's 2023 semi-annual report shows that it will continue to expand new stores.

"The franchise model helps gold production enterprises to expand market coverage, but in actual operation, many gold brands can not restrain other business activities of franchisees, and even some franchisees operate multiple brands of franchisees at the same time, which further increases the difficulty of management. A gold industry insider said.

"If the brand blindly expands, and at the same time lacks efficient technical means to supervise the franchise store to sell products and provide services according to the agreement, once there is a problem, it will affect the brand value and business reputation. Zhao Jingwu, an associate professor at the Law School of Beihang University, said.

Zhang Yongtao, vice president and secretary general of the China Gold Association, said on the 3rd that strengthening the supervision of franchisees is the responsibility of the gold brand to operate steadily, and gold jewelry enterprises should strengthen the access review, standardize the business process and system construction; Strengthen the discipline and professional ethics training of franchisees to ensure that franchisees carry out business activities in a standardized manner, put an end to violations of laws and regulations, maintain brand reputation, and ensure the healthy and orderly development of the gold and jewelry industry.

CICC Jewellery said it has carried out self-inspections and strengthened training to make franchisees more aware of unauthorized businesses. In the future, we will comprehensively strengthen the access control and authorization management of the franchise business, and invite consumers to supervise the products and services of each store.

How to avoid "stepping on the pit" in gold investment?

CICC Jewellery faced the problem head-on and "paid in advance" for the victims, which made the relevant consumers breathe a sigh of relief. However, gold, as a safe-haven asset, is not without its risks. In recent years, some operators have "fished in troubled waters" and even set up scams, and gold investment chaos has occurred frequently.

A case of illegally absorbing public deposits cracked by the Shandong police last year also used the gold custody business as a "prop".

In December 2021, Sui Moumou registered and established a jewelry limited company in Yiyuan County, Shandong Province, and deceived customers into signing a custodian gold sales contract with a gold group co., LTD. with "high return and no risk". After the contract expired, Sui Moumou and others lost contact, and the insurance policy provided by the company was also confirmed to be false. According to the disclosure, the company has absorbed deposits of more than 600 yuan from dozens of investors, causing direct economic losses of more than 400 yuan to the masses.

How to make gold investment more secure?

The Local Financial Supervision and Administration Bureau of Nantong City, Jiangsu Province has previously issued a reminder to remind the public that before investing in gold custody products, they must verify whether the relevant institutions have the qualifications for issuance or consignment, and find out whether the physical gold invested is registered in financial institutions or formal gold exchanges.

Industry insiders said that there are still difficulties in daily supervision of the gold retail end to engage in financial business in violation of regulations. Zhao Jingwu believes that in addition to the brand itself to strengthen the supervision of franchisees, the administrative supervision department should move the regulatory threshold forward, through the development of gold and its jewelry business norms and rectification actions, strengthen the gold stores and other places, find problems seriously investigate and deal with, and maintain market order.

In addition, investors need to do their homework. "Gold is an interest-free asset, and the realization of physical gold investment income can only be achieved by buying low and selling high, and products that pay interest in disguise need to be highly vigilant. Jiang Shu, an expert in the gold market, pointed out that market participants should be clear about the purpose of intervening in the market, so as to choose more suitable investment or consumption channels. (Xinhua News Agency)