**Interview with Industry Experts: Why Are Gold Jewelry Stores Closing Despite Soaring Gold Prices?**
Recently, spot gold prices have reached historic highs, with some gold jewelry brands pricing their products above 800 RMB per gram, and even exceeding 810 RMB per gram. This surge in gold prices has sparked media interest, raising questions about why gold jewelry retailers are closing stores despite the apparent gold boom.
We spoke with experts to unpack this paradox. Notably, major companies like Chow Tai Fook (1929.HK) reported a projected revenue drop of 18% to 22% year-over-year for the first half of the 2025 fiscal year. In particular, net profit is expected to decline by 42% to 46%. Similarly, Luk Fook Holdings (0590.HK) has seen a 16% drop in retail value and a staggering 25% decrease in overall retail income for Q2 of FY2025. Meanwhile, King Fook Holdings (02882.HK) also noted significant losses compared to the previous year.
Industry insiders suggest that the dip in performance can be attributed to fluctuating gold prices, as acknowledged in the financial reports of these companies. However, there are exceptions, with brands like Lao Feng Xiang (600612.SH) and the high-end oriented Lao Pu Jin (06181.HK) showing stable or even growing performance.
Investment consultant Qu Fang from Wanlian Securities pointed out that the uncertainty surrounding gold prices is making consumers hesitant. “With rising material costs, it’s challenging for businesses to pass those costs onto consumers in the short term,” Qu explained. This has led to an impact on the profitability of gold jewelry companies.
During a recent visit to several gold stores on October 24, despite high official gold prices, many retailers offered discounts, presenting gold jewelry prices under 750 RMB per gram—some even offering prices as low as 736 RMB per gram.
As for the consumer behavior, there seems to be a divide between the buying patterns for gold jewelry and gold bars. “For those purchasing wedding jewelry and gifts, the demand remains consistent,” staff in the stores noted, emphasizing that while the price of gold is fluctuating, buyers are adjusting their purchasing strategies by opting for smaller weights.
Notably, Chow Tai Fook recently adjusted its pricing strategy for fixed-price products, raising prices by 10% to 15% in response to soaring gold prices. A company spokesperson commented that the brand closely monitors market conditions and adjusts prices accordingly.
Interestingly, while gold jewelry often carries a higher premium, many consumers seem to gravitate toward gold bars due to their practicality and lower associated crafting costs. Price offers for gold bars ranged from 636 RMB to 754 RMB per gram, making them an appealing option.
As the industry navigates these challenges, it appears that store closures are becoming a common trend. According to Chow Tai Fook’s financial report, there’s been a notable decline in jewelry sales, with a 24.7% dip in gold jewelry sales in mainland China. As of September 30, the number of retail points decreased by 145.
Sixi Group also reported losing 76 stores within the same timeframe, attributing much of the decline to both macroeconomic factors and continually high gold prices, which contributed to a 13% year-on-year drop in retail value.
Qu Fang further elaborated on the impact of volatile gold prices at different market levels, noting that while upstream companies might benefit from rising gold prices, they also face increased costs. In contrast, downstream retail businesses, characterized by thin profit margins and intense competition, are experiencing greater pressures, necessitating innovative strategies to attract customers.
Regarding rising gold prices and its impact on inventory value, Lao Feng Xiang clarified that their business model combines wholesale and retail. They strategically purchase gold based on anticipated market conditions, but significant price fluctuations create challenges in production and planning.
The latest statistics indicate a downturn in jewelry retail sales, with significant declines in both July and August. Experts agree that the consumer sentiment surrounding gold jewelry is shifting, with younger generations, particularly those in their 20s and 30s, becoming the primary buyers.
In a recent interview, Chow Tai Fook’s Managing Director, Huang Shaoji, remarked on the changing consumer landscape. He noted that shoppers are increasingly viewing gold as a hedge against risk and a desirable investment, while also appreciating the aesthetic value of wearing gold jewelry.
As the gold market continues to grapple with price volatility and consumer behavior shifts, the industry watches closely to see how these trends will evolve moving forward.
