Gold turmoil for 72 hours: gold prices soared first and then fell, and Shuibei merchants lowered manual fees to "grab customers"

Times Finance

2024-07-20 19:42Posted on the official account of Guangdong Times Finance

Source of this article: Times Finance Author: Li Yiwen Alimire

The ups and downs of gold are "stimulating" the sensitive heart of the market.

On July 16, after the Trump rally shooting, the gold market, which had been in the dark for nearly two months, began to be restless. On the same day, the spot gold price was pushed up to $2468.70 an ounce, up $46.55, or 1.92%, on the day, once again refreshing the previous record set in May. On the 17th, spot gold once again set a new record intraday, reaching $2474.85 per ounce.

The frenzy of the international gold market was transmitted to China, and jewelry gold rose sharply. The price of domestic pure gold jewelry of Chow Tai Fook, Lao Fengxiang, Chow Sang Sang and other brands rose from the general quotation of 730 yuan/gram to around 750 yuan/gram, an increase of nearly 20 yuan per gram.

But the revelry didn't last until the third day. On July 18, spot gold prices plunged more than $14 to $2,444.81 an ounce. On the 19th, the spot gold price fell again, and once fell below the $2,400 per ounce integer mark. As of the close, the quotation was $2400.33 per ounce, down more than $44, or 1.83%.

Affected by the international gold price, domestic jewelry gold has also returned to around 730 yuan/gram.

After breaking the record, the price of gold ushered in another big dive. (Source: Wind)

In less than a week, the price of gold first broke the record twice, and then dived rapidly, what caused the "roller coaster" of gold prices? Between the ups and downs of gold, who is making profits? Will gold prices be able to "boil" again in the future?

The higher the gold price, the more rolled the scallops

At the historic moment when the price of gold broke the record again, Kang Yongyi (pseudonym), who was engaged in gold trading, became anxious in his heart, "It's about to be lost." ”

Kang Yongyi's gold stall is on the first floor of Shenzhen Shuibei International Jewelry Trading Center. As the country's largest gold jewelry trading and distribution center, Shenzhen Shuibei Market has gathered nearly 10,000 gold jewelry merchants, before the price of gold continued to rise, the Shuibei market, which is known for its wholesale retail gold, is highly sought after by consumers, and even once became a new "Internet celebrity check-in point".

On July 17, when the price of pure gold jewelry of a brand reached 753 yuan/gram, the gold price of Shenzhen Shuibei Market was 584 yuan/gram on that day. (Source: Times Finance Li Yiwen/photo)

But now the situation has changed. Kang Yongyi told Times Finance that even if there is no brand premium, today's gold price is at a historical high that discourages many ordinary consumers.

Kang Yongyi said that the gold price in the Shuibei market closely follows the international gold price and is highly transparent, and the fluctuating gold price also makes merchants dare not dare to stock up on large sums of money, and most merchants can only earn processing fees. However, in order to attract customers, some merchants have moved from style to service, and from service to processing fees. "Generally, the processing fee is between 20 yuan/gram and 50 yuan/gram, but at present, the processing fee of some old jewelry in some stores has been reduced to 10 yuan/gram."

On July 17, when Times Finance visited the Shuibei market, the bosses of many stalls reported that due to the impact of high gold prices to suppress consumption, ordinary consumption has decreased significantly this year, and the "involution" among peers has intensified, and the processing fees of some styles have been significantly reduced, and the overall profit since the beginning of the year has also fallen significantly compared with last year.

On the afternoon of July 17, Shenzhen Shuibei International Jewelry Trading Center. (Source: Times Finance Li Yiwen/photo)

Relevant data also show that although some groups in China have the habit of "chasing up and killing down", under the current gold price, consumers have increased wait-and-see sentiment.

In 2023, the spot gold price will rise from $1,820 per ounce to $2,062 per ounce, an increase of more than 13% for the year. Affected by the overall gold market, China has started a gold buying boom, and China will consume a total of 706 tons of gold jewelry in 2023, a year-on-year increase of 8%, surpassing India to become the world's largest gold jewelry consumption market.

Since the beginning of 2024, spot gold prices have risen by more than 20% on the basis of 2023, and the highest intraday price once reached $2474.85 per ounce. But this time, there has been a significant decline in the consumption of gold jewelry.

According to the World Gold Council, jewellery consumption in China was 184t in Q12024, down 6% year-on-year. On July 15, the total retail sales data of consumer goods in June released by the National Bureau of Statistics also showed that the consumption of gold, silver and jewelry fell by 3.7% year-on-year.

In fact, in the case of high gold prices suppressing consumer demand, many terminal-oriented brand gold days are not easy. According to the quarterly report of the famous gold jewelry brand Chow Tai Sang for the first quarter of 2024, the operating income in the first quarter of 2024 was 5.07 billion yuan, a year-on-year increase of 23.01%, but the net profit was only 341 million yuan, a year-on-year decrease of 6.61%.

Chow Tai Fook's unaudited main operating data for the period from April 1 to May 31, 2024 also showed that the retail value decreased by 20.2% year-on-year.

Gold prices are expected to continue to surge higher

In fact, there is a precedent for the ups and downs of gold prices.

Looking at the trend of gold in 2024, the price of gold has risen strongly since March, breaking through the $2,200, $2,300, and $2,400 mark. But on May 20, after the price of gold hit a record of $2,450.1 an ounce, the price of gold fell repeatedly, and related topics repeatedly rushed to the hot search on social media. On July 2, the spot gold price fell to $2,318.94 per ounce intraday, which triggered the market's speculation that gold fell below the 2,300 mark.

However, unlike the ups and downs of previous months, the ups and downs of the gold price came too quickly. The price fluctuated over several days, close to $100.

In this regard, Song Jiangzhen, a senior researcher at the gold market in southern Guangdong, told Times Finance that the sharp rise and fall of gold prices in this round is mainly affected by the market's expectations for the Federal Reserve to cut interest rates.

Song Jiangzhen analyzed that the recent testimony of Fed Chairman Powell in Congress "turned dovish", coupled with the weakness of United States economic data, strengthened the Fed's hope of cutting interest rates. In addition, the shooting at the Trump rally also greatly supported the rise in gold prices. Together, these factors are driving demand for gold as a safe-haven asset.

Specifically, United States inflation has resumed its downward trend after rising sharply at the beginning of the year. The United States Department of Labor disclosed a report that the annual rate of non-seasonally adjusted CPI in United States rose 3.0% year-on-year in June, below market expectations of 3.1% and the lowest level since June last year. At the same time, the CPI fell by 0.1% month-on-month in June, the first negative growth since May 2020.

Although inflation has not yet reached the Fed's previous target of 2%, on July 15, local time, Powell, who had a hawkish attitude towards "interest rate cuts", "turned hawks into doves" and said that interest rate cuts would be initiated before inflation really fell to 2%.

Behind Powell's change in attitude towards rate cuts is the weakening job market in United States. The data showed that the United States unemployment rate unexpectedly climbed to 4.1% in June, the highest level since November 2021, and the United States Labor Department also revised down the total number of new nonfarm payrolls for April and May by 111,000.

The larger-than-expected rise in the United States unemployment rate in June sparked concerns about the United States economy. (Source: Picture Worm Creative)

After the release of the data, the domestic call in the United States for the Fed to cut interest rates to promote the economy became more and more "loud". According to a report by Xinhua Finance on July 17, a group of Wall Street economists, including Goldman Sachs Chief Economist Jan Hatzius, warned that after the Federal Reserve raised interest rates to a 20-year high, it had waited too long for a policy change, and that it was urgent to cut interest rates.

"But there is too much hype in the market for interest rate cut expectations," Song Jiangzhen said, although the market has predicted that the Fed will cut interest rates in September, but there is still a lot of distance from the date of interest rate cuts. After the release of relevant data, market funds overreacted with the help of hot events, hyped up interest rate cut expectations, and pushed up gold prices.

Tan Yaling, president of the China Foreign Exchange Investment Research Institute, also believes that the current market is too optimistic about the Fed's interest rate cut expectations, which is an important reason for the sharp rise and fall of gold prices.

Tan Yaling analyzed that although United States inflation fell to 3% in June, there is a possibility that the United States will actively lower oil prices to adjust inflation. In addition, the United States housing starts rate is still rising, and the future United States domestic new housing prices and international oil prices are at high levels. United States inflation control is still difficult to say easy, and the current market is too optimistic about the Fed's interest rate cut expectations.

Affected by the plunge in international gold prices, the current domestic brand pure gold jewelry prices have all "given back" the previous rise. (Source: Screenshot of the official website of a gold brand)

For the future trend of gold prices, Tan Yaling said that in the context of the Fed's interest rate cuts are still uncertain, as a non-interest-bearing asset, although gold prices have "surged" in the short term, but it is difficult to maintain in the future, and the possibility of a further pullback in gold prices to $2,100 / ounce is not ruled out in the future.

However, she also stressed that there are many global uncertainties such as United States debt risks and geopolitical conflicts, and in the medium and long term, she is still optimistic about gold as an asset, and the future gold price is still expected to remain at $2,500 / ounce after the pullback in place.

Song Jiangzhen also believes that the market may react in advance in the case of interest rate cuts, and gold prices will have a correction situation. In his view, the rate cut is not a one-time event, it may be accompanied by broader monetary easing, and gold prices are expected to maintain an upward trend in the long term, and the possibility of reaching $3,000 per ounce in two years is not ruled out in the future.

"Don't think that 3,000 points is very high, although the price of gold fluctuates, but the future of the favorable environment for gold will not be fundamentally changed in the short term, as long as the overall increase in the past two years, the price of gold 3,000 points can be reached." Song Jiangzhen said.

View original image 520K

• 

• 

• 

• 

•