Every reporter: Zhang Hong Every editor: Ma Ziqing
On April 26, the China Gold Association released industry data for the first quarter of 2024. According to the China Gold Association, the impact of high gold prices on gold consumption has been polarised. Bar and coin consumption at relatively low premiums rose sharply, but consumer wait-and-see sentiment towards gold jewellery increased. Gold jewellery retailers are under pressure, and the production and operation risks of gold processing and sales enterprises are increasing.
In the first quarter of 2024, the output of raw gold in mainland China will be 85.959 tons, an increase of 0.987 tons compared with the same period in 2023, a year-on-year increase of 1.16%, of which 60.191 tons of gold from gold minerals and 25.768 tons of non-ferrous by-product gold will be completed. According to the staff of the China Gold Association, due to the increase in the profitability of gold mining enterprises, there is room to further reduce the incoming grade, which will further increase the gold production.
Gold jewellery consumption is "cold", and gold bars and coins with lower premiums are "hot"
At the macro level, the world's major economies continue to implement loose monetary policies, the US economic data is less than expected, geopolitical conflicts escalate, and central banks continue to increase their holdings of gold. Under the superposition of multiple factors, gold prices have risen strongly recently, repeatedly breaking record highs.
Image source: Straight Flush iFinD
In the first quarter, China's gold production increased by 1.16% year-on-year, and gold consumption increased by 5.94% year-on-year. However, the impact of high gold prices on gold consumption has been polarized. Specifically, gold bars and coins were 106.323 tons, up 26.77% year-on-year, and gold jewelry consumption was 183.922 tons, down 3.00% year-on-year, with increased sales pressure on gold jewelry retailers.
Talking about the reasons for the differentiation, the China Gold Association said that the rapidly rising gold price, coupled with factors such as gold jewelry processing fees and high brand premiums, has strengthened consumers' wait-and-see sentiment, and gold jewelry consumption has been suppressed to a certain extent.
In addition, the high price of gold and huge fluctuations have increased the risk of production and operation of gold processing and sales enterprises, wholesale and retail enterprises have become cautious in purchasing, the cost of raw materials for jewelry processing enterprises has risen, shipments have declined, and some small and medium-sized processing enterprises have even stopped work and taken holidays. In contrast, physical gold investment has gained more attention due to the surge in safe-haven demand, with bar and coin consumption at relatively low premiums rising sharply.
Due to the increase in profit margins, gold mining companies further exploit low-grade gold resources
In the investment market, in the first quarter, the cumulative trading volume of all gold varieties on the Shanghai Gold Exchange was 15,300 tons bilaterally (7,600 tons unilaterally), a year-on-year increase of 32.29%, the cumulative trading volume of all gold varieties on the Shanghai Futures Exchange was 29,000 tons, a year-on-year increase of 14.89%, and the holdings of domestic gold ETFs increased to 66.96 tons, an increase of 5.49 tons or 8.93% year-on-year from 61.47 tons at the end of 2023.
It is worth noting that since March, the price of gold has risen rapidly, and the trading volume has increased sharply month-on-month. To this end, the exchange has adopted certain market risk control measures. The Shanghai Gold Exchange issued a notice to increase the margin ratio and price limit of gold deferred contract trading, while the Shanghai Futures Exchange implemented trading limits for gold futures varieties and raised the handling fee of the main gold futures contract.
Image source: Shanghai Gold Exchange website
On the supply side, mainland gold production in the first quarter was 85.959 tons, up 1.16% year-on-year. Smelters increased the procurement of imported gold raw materials, and the gold output of imported raw materials increased by 78.00% to 53.225 tons.
It is worth noting that, according to the staff of the China Gold Association, under the condition that the rapid rise in gold prices and the cost of production and operation remain relatively stable, the willingness of gold mining enterprises to carry out geological exploration and infrastructure technological transformation has been strengthened. At the same time, due to the increase in the profitability of gold mining enterprises, relatively low-grade gold mines that could not be selected in the past due to high mining costs may also be selected, and gold production will further increase.
National Business Daily