Gold consumption in the Year of the Dragon continues to rise, compared with gold consumption during the Spring Festival last year, although the price of gold has climbed to 626 yuan / gram this year, which has not extinguished people's enthusiasm for buying. During the Spring Festival, the reporter shuttled through the major gold sales counters in Luoyang City, Henan Province and found that the front of the merchants was full of people, and there was an endless stream of customers who came to buy gold jewelry, and some counters even lined up in front of a long line.
According to the reporter's incomplete statistics, different from previous buying groups, female consumers born in the 80s became the main force to buy gold jewelry during the Spring Festival this year, and their enthusiasm for buying continued to rise. In addition to the continued popularity of gold jewelry, gold bars for the Year of the Dragon and some gold jewelry with the theme of the Year of the Dragon are also popular among consumers.
It is worth noting that although the domestic gold consumption boom continued to heat up during the Spring Festival, the international gold price was unmoved, and did not rise sharply, but fell sharply. As the sharp rise in inflation in the United States weighed on gold prices, the international gold price plummeted by $30 per ounce after the release of the data. As of February 14, the international gold price temporarily closed at 2004 US dollars / ounce, down 2.25% in the past week.
Deal a bracelet in 30 minutes
During the Spring Festival, the reporter visited several gold sales stores and found that most of the groups who used to buy gold were elderly, and they would choose to buy gold rings, and the style was relatively simple. However, the reporter learned at the old Fengxiang gold counter that the main force of gold consumption is getting younger and younger, among which the post-80s female consumers are the mainstay, and they are more inclined to gold bracelets, and the style of the bracelet will be fashionable.
The gold shop is full of customers
"When gold soared last year, I bought three gold necklaces, and this year I went back to my hometown for the New Year and found that the price of gold here in Luoyang is also appropriate, and I will buy it directly when I see the style I like. In fact, buying gold is relatively simple, as long as you pay attention to two points, one is the price, and the other is the style. For the intrinsic texture of gold, the quality of each gold store is relatively uniform, so there is no need to worry about purity. Therefore, it is easier to buy gold than to buy other goods. Ms. Li said in an interview with a reporter from the China Times.
As Ms. Li said, gold is different from other commodities, as long as you look at the style, you can buy it directly, and there is indeed no need to hesitate too much. The reporter observed that from the optimistic style to the payment, Ms. Li only took more than 30 minutes, such a fast transaction, further indicating that domestic gold consumption still has a strong support. For some male customers, they are more inclined to buy small gold bars or gold beans, mainly for investment purposes.
At the same time, the reporter asked the sales staff of the major counters that the salesmen of the major brands were extremely busy during the Spring Festival, and sometimes there were too many customers to eat, and sometimes they didn't even have time to drink saliva. A salesperson told the "China Times" reporter that this may be related to the recent stability of gold prices, and people feel that the price of gold should not be able to fall, in case it rises again, not to spend more money to buy.
Domestic gold consumption has continued to grow in recent years, with total domestic jewellery demand reaching 630t in 2023, up 10% year-on-year, and domestic jewellery spending reaching a record high of RMB282 billion, despite a 17% surge in the domestic gold price in 2023, according to public figures. According to a research report, gold bar and coin sales remained strong due to the strong rise in gold prices in 2023 and the weakness of other RMB assets, which made gold bar and coin sales more and more favorable.
The gold market sinks to the second and third lines
In the exchange with gold sales staff, the reporter found that although there were many customers who bought gold during the Spring Festival last year, compared with this year's Spring Festival, gold sales have doubled this year, and consumers are enthusiastic about buying. Some industry insiders said that this has a certain relationship with the sinking of the gold market in recent years. According to public data, the per capita annual consumption of gold jewelry in third-tier cities and below increased from 460.7 yuan in 2017 to 617.5 yuan in 2022, with a compound annual growth rate of 6.0%, exceeding the first- and second-tier cities and the national average.
China Gold (600916. SH) previously disclosed the record of investor relations activities, the company's store layout in 2023 will reach the target of 4,000 at the beginning of the year, and maintain a growth rate of 10% in the future.
Consumers are picking up gold jewelry
Chao Hongji(002345. SZ) also previously said that the company's existing stores are mainly in first-, second- and third-tier cities, and the expansion in the past two years will mainly be in second- and third-tier cities, but mature areas will sink to third- and fourth-tier cities, or even sink further. In addition, Chow Tai Fook's 2023 Jewellery Survey Report shows that consumers in the sinking market of Chinese mainland attach more importance to brands. 89% of consumers in Tier 3 and 92% of consumers in Tier 4 cities are influenced by jewellery brands.
"Gold prices hit an all-time high of $2,135 an ounce on December 3 last year, and then quickly retreated, falling below the $2,000 an ounce mark in ten days, and gold has been in a narrow range of $2,000-$2,100 an ounce in the last two months. Market expectations for a Fed rate cut have cooled, but there is still no consensus. The volume of gold futures has gradually shrunk since mid-January, suggesting that investors are more on the sidelines, waiting for clearer signals. Huang Jinwen, former director of strategic planning at the Chicago Mercantile Exchange, said in an interview with a reporter from the China Times.
However, the reporter found that since 2023, the price of domestic gold in China has been relatively strong compared with the international gold price. In this regard, He Yi, a precious metals analyst at Chuangyuan Research Institute, said that since 2023, the domestic gold price has been slightly stronger than the international gold price, and the main internal logic is the impact of consumption and investment tendency.
"First of all, domestic gold consumption is better than that of foreign countries, and China's gold consumption will be the first in the world in 2023; secondly, the impact of investment tendency, in 2023, there will be a net outflow of international gold ETF holdings, while domestic gold ETFs are net inflows, reflecting the inconsistency of domestic and international investment in gold, the international market tends to equity assets, and gold is sought after in the absence of good investment targets in China. The combination of the above factors makes the domestic gold premium. He Yi said.
Can the international gold price still rise?
Data released by the U.S. Department of Labor on February 13 showed that the U.S. consumer price index (CPI) rose 0.3% month-on-month in January this year, an increase of 0.1 percentage points from December 2023 and the largest increase since September last year. According to the data, the US CPI rose by 3.1% year-on-year in January this year, well above the Fed's long-term inflation target of 2% and higher than the consensus expectation of 2.9% growth. Excluding volatile food and energy prices, the core CPI rose 0.4% month-on-month, an increase of 0.1 percentage points from the previous month and a year-on-year increase of 3.9%.
"From the point of view of sub-items, the largest contribution to the year-on-year data decline is the energy item, the energy seasonally adjusted month decreased by 4.30% year-on-year, the previous value decreased by 1.80%, and the year-on-year data of other sub-items was slightly firmer. From the perspective of month-on-month data, the US composite CPI rose 0.30% month-on-month in January, the previous value was 0.20%, and the core CPI was 0.40% month-on-month, the previous value was 0.30%, and the month-on-month data showed a recent rebound in inflation. He Yi said.
He Yi said that among the sub-items, education and communications, food and beverages, housing, medical and other services rebounded significantly, and goods, clothing, non-durable goods, transportation and energy fell more sharply month-on-month. Year-on-year data reflects annual price changes, month-on-month data reflects recent price changes, year-on-year data reflects longer-term price changes, and month-on-month data reflects short-term price changes.
Judging from the year-on-year and month-on-month data in January, the rebound in inflation is more obvious, especially in the service industry, which has a greater positive pull on CPI, while energy-related sub-items have a greater negative pull. He Yi said that combined with the previously released ISM manufacturing, non-manufacturing PMI and non-farm payrolls data, the current new jobs in the United States are mainly concentrated in the service industry, rather than manufacturing. After the release of the CPI data, the market's expectations for interest rate cuts fell sharply, with 10-year U.S. Treasury bonds and gold falling sharply in the short term, while the U.S. dollar index quickly rose and U.S. stocks opened lower.
Huang Jinwen also said that the Federal Reserve decided to keep interest rates unchanged again at the January 31 interest rate meeting, and the U.S. non-farm payrolls data for January was hot, showing that the U.S. economy not only did not have a recession, but showed signs of slightly overheating. The latest CPI data also shows that the Fed's efforts to raise interest rates to fight inflation in the past two years have not yet achieved a decisive victory.
Some industry insiders said that the accelerated growth of core inflation, especially the high cost of living, has added pressure to the continued decline in inflation and added uncertainty to the Fed's next monetary policy direction. According to a tracking data from the Chicago Mercantile Exchange, after the release of the data, the market expected the probability of the Fed to maintain interest rates in March soared to more than 90%, and the probability of a 25 basis point rate cut in May plummeted to less than 35%, while the probability of keeping rates unchanged exceeded 60%.
Huang Jinwen believes that the Federal Reserve's interest rate policy is still the main factor dominating the global financial market this year, and the reaction of various markets is different at the moment when the interest rate policy expectations change, among which the interest rate market is the most rational. The 10-year Treasury rate rebounded from 3.8% after the Fed meeting to reach 4.27% after the latest inflation data, fully reflecting cooling rate cut expectations.
"At the moment, the Federal Reserve is keeping interest rates unchanged, and gold prices are waiting for a clearer signal. For the later trend of international gold prices, gold prices should be able to continue to rise when the Fed officially begins to cut interest rates. If interest rate cuts are more than once this year, gold prices could hit new highs. Geopolitics has only had a short-term impact on gold prices, which are dominated by the Federal Reserve. Huang Jinwen said.
UBS also said in its latest report that it is optimistic about the performance of gold prices this year. In anticipation of the Federal Reserve's imminent start cutting interest rates, international gold prices are expected to rise further in 2024. UBS precious metals strategists said that the Fed's shift to easing policy and a weaker dollar will push gold prices higher, and the international gold price is expected to reach $2,200 per ounce by the end of 2024. At the same time, the Palestinian-Israeli conflict continues, and investors are expected to start increasing their allocation to gold under the influence of uncertainty in the macro environment and geopolitical risks.
China Times
Editor: Xiang Yanhong