The price of gold soared, and Chow Tai Fook was ecstatic

After the price of gold jewelry broke through the 630 yuan mark, as the international gold rose and fell off a cliff of more than 120 US dollars to close down, the brand gold price fell to 619 yuan / gram, but it was still at a high level. Since the beginning of this year, the price of gold has been soaring, and the price of gold jewelry per gram has also increased by nearly 19%.

On December 4, COMEX gold futures stood above the $2,150 / ounce mark, hitting an intraday high of $2,152.3 / ounce, and spot gold rose to $2,144 / ounce, both of which continued to hit record highs. With the rise in international gold prices, the price of some gold jewelry once exceeded 630 yuan/gram, reaching the highest point this year.

On December 5, the international gold price fell, and the price of pure gold jewelry of Chow Tai Fook and Chow Sang Sang fell by 11-13 yuan/gram to 619 yuan/gram.

Although there has been a certain pullback, the price of gold has been "soaring" this year. As early as September this year, the retail price of gold jewelry of Chow Sang Sang and other brands broke through the 600 yuan mark, hitting a new high of 630 yuan/gram again in just three months, compared with the retail price of gold of 530 yuan/gram in the same period last year, an increase of nearly 19%. China's gold base gold price was 475 yuan/gram, up nearly 18% from 404 yuan/gram in the same period last year.

As for the reasons for the fluctuation of gold prices, Lin Dahui, a senior investment analyst at gold, believes that there are many reasons for this round of fluctuations in gold prices, including whether global central banks will slow down their efforts to hoard gold because gold prices are at an all-time high. In addition, from the end of this year to the beginning of next year, during the shopping season in Europe and the United States, the wedding season in India and the Lunar New Year in China, consumer demand for physical gold in these major gold consuming countries is expected to remain strong, which also drove gold prices higher, and gold fell off a cliff of more than $120 after surging higher yesterday, indicating that the market may be too aggressive in pricing in the Fed's interest rate cuts.

Yu Fenghui, an economist and new finance expert, also said that the weakening of the Fed's tightening monetary policy expectations is the main factor in the rise in international gold prices, which reduces the opportunity cost of holding gold, thereby increasing the demand for gold, and the decline in the US dollar exchange rate has also promoted the rise in gold prices.

"The reason for today's decline is mainly due to the recovery of US Treasury yields, the market's over-prediction of the Fed's interest rate cut, the future rise in gold prices is not sustainable, the current price is more risky, and consumer investment also needs to be rational." Yu Fenghui said.

Although the volatility is more obvious, the overall rise in the gold price still ushers in a new round of opportunities for the gold market. Mengjinyuan and Laopu Gold disclosed their prospectus documents on the Hong Kong Stock Exchange on September 28 and November 10 this year respectively, and the gold and jewelry company opened a "queue" IPO.

In the first half of 2023, the mainland gold jewellery consumer market continued to recover. According to data from the China Gold Association, in the first half of the year, the mainland's gold consumption was 554.88 tons, an increase of 16.37% year-on-year, of which the consumption of gold jewelry was 368.26 tons, a year-on-year increase of 14.82%.

In this context, Mengjinyuan achieved operating income of 9.316 billion yuan in the first half of 2023, a year-on-year increase of 38.67%;The prospectus of Laopu Gold also shows that in the first half of 2023, the investment consumption of gold has driven the performance growth of Laopu Gold, with the company's revenue of 1.418 billion yuan, a year-on-year increase of 116.1%, a net profit of 197 million yuan, a year-on-year increase of 232.2%, and a net profit margin of nearly 14%.

According to the prospectus, in 2022, the revenue of the old gold single store will rank first in the industry. In the first half of 2023, the two stores in Beijing SKP generated a total revenue of 154 million yuan, with a monthly revenue of about 427,000 yuan per square meter. In terms of gross profit margin, from 2020 to the first half of 2023, the gross profit margin of Laopu Gold will be 43.1%, 41.2%, 41.9% and 41.7% respectively. In contrast, the gross profit margin of Zhou Shengsheng in the same period was 25.27%, 25.30%, 26.30% and 28% respectively.

As for the reason why the gross profit margin is significantly higher than that of comparable companies in the market, the reason given by Laopu Gold is that on the one hand, the high-end brand positioning allows it to have higher pricing, which supports the higher gross margin, and on the other hand, the company's focus on ancient pure gold gold products and pure gold diamond inlay products ensures higher profit margins.

Established gold jewellery companies have also been the beneficiaries of the gold boom.

Chow Tai Fook's financial report for the first half of FY2024 shows that revenue increased by 6.4% year-on-year to HK$49.53 billion, and major operating profit increased by 37.7% to HK$5.989 billion in the first half of the year, due to the continuous optimization of pricing strategies and improvement of operational efficiency, as well as benefiting from the rise in gold prices.

Chow Tai Sang Jewelry's report for the third quarter of 2023 shows that in the first three quarters, the total revenue increased by 39.81% year-on-year to 12.49 billion yuan, and the net profit attributable to the parent company increased by 17.8% year-on-year to 1.095 billion yuan.

Judging from the main group of gold consumers, the consumer portrait of the former "Chinese aunt" is weakening, and the purchasing power of young consumer groups is rising. According to the 2022 China Gold Jewellery Consumption Industry Consumer Insights Report, from 2016 to 2021, the proportion of young people buying gold has increased from 16% to 59%, making it the top of the list of gold jewellery consumption potential among all age groups.

Gold jewelry brands are also "racking their brains" to attract the attention of young people. Chow Tai Fook has successively launched co-branding with two-dimensional brands such as Ultraman, Crayon Xiaoxin, Disney, Sanrio, etc., while brands such as Chao Hongji have released a variety of plain gold jewelry and gold inlaid jewelry stacking solutions on Xiaohongshu to "plant" products for young consumers. According to the latest data from Xiaohongshu cited by the China Gold Association, the overall growth of notes related to gold matching in the first half of 2023 reached 240%.

Pan Helin, co-director and researcher of the Digital Economy and Financial Innovation Research Center of Zhejiang University International Business School, believes that gold prices are highly volatile, and bulls and bears will eventually come to an end. "Many gold companies are still looking at the sky, the ability to resist risks is not strong, in the gold industry chain, each of the sensitivity to gold prices is different, in the gold price upward stage, gold mining companies benefit more, and gold jewelry companies can also improve their performance through consumer purchases, but the overall improvement is limited. ”

He further pointed out that in the future, gold brands should be closer to the preferences of young people in terms of design and highlight their individuality, and in terms of sales, they should shift to online to reduce costs. "At the same time, it is also necessary to moderately launch some gold products suitable for investment, reduce the design premium, increase the recycling valuation, and meet the needs of consumers for value preservation. ”

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Characters|蔺雨葳

Editor|Kong Yaoyao

Image source: Enterprise official WeChat