The surging gold price finally ushered in a correction after mid-April. On May 7, the opening price of the Au99.99 contract on the Shanghai Gold Exchange was 544.10 yuan/gram, down 32.88 yuan per gram from the all-time high of 576.99 yuan/gram set on April 15. A reporter from Beijing Youth Daily visited major brands and found that during the May Day period, the listing price of pure gold jewelry of well-known brands such as Chow Tai Fook, Luk Fook and Chow Sang Sang fell to 703 yuan / gram, down about 34 yuan from the high point of 737 yuan in mid-April. Even so, the current gold price is still at a historical high of more than 700 yuan/gram, which discourages many consumers.
When the gold price is adjusted at a high level, how should investors choose? A reporter from Beiqing Daily found that people in the industry also have different views on this, some people believe that the current pullback is not deep, and they should be cautious and wait and see, and some people think that they should seize the opportunity to buy on dips.
Gold prices have been volatile since April
Compared with the upward trend in March, the gold price fluctuated like a "roller coaster" in April. According to the daily trading data released by the Shanghai Gold Exchange, on April 15, the price of Au99.99 rose to an all-time high. On the same day, the opening price was 567.01 yuan/gram, the closing price was 558.68 yuan/gram, and the highest price was 576.99 yuan/gram. On April 23, Au99.99 reached an intraday low of 542.01 yuan/gram, and the closing price was 544.01 yuan/gram, down 2.63% from April 15. In 8 days, the intraday low price fell 6% from the high.
On May 6, the first working day after the May Day holiday, the price of Au99.99 continued to decline, falling to an intraday low of 540 yuan/gram and closing at 544.13 yuan/gram.
Ordinary consumers feel the changes in the domestic gold price mainly through the listing prices of major brands of gold jewelry. During the May Day period, the gold price of domestic gold stores fell to 710 yuan, compared with the high point of 737 yuan in mid-April, it fell nearly 30 yuan in half a month, and there was a situation where it rose and fell by more than 10 yuan / gram in one day.
On the morning of May 1, the retail price of many domestic gold stores fell by 15 yuan to 703 yuan/gram; on the 2nd, the gold price of many gold stores rose by 11 yuan/gram; after falling by 4 yuan/gram on May 3, the retail price of brand gold stores basically remained in the range of 707-709 yuan/gram. On May 7, it rose to 713 yuan/gram.
It is understood that the recent sharp drop in domestic gold prices is mainly affected by international gold prices. On April 22, the international gold price fell by $64.95 per ounce, down as much as 2.72%, the largest one-day decline since February last year, and on April 23, the international gold price once broke through the key point of 2300.
On 3 May, the latest US non-farm payrolls data for April fell far short of expectations, reviving market expectations for a Fed rate cut this year. However, due to the easing of geopolitical risks in the Middle East and the profit of some investors, the international gold price fluctuated sharply, falling to a new low in nearly a month.
Some gold shops have a light business
Since late March, there has been a wave of rapid gains in gold prices. On March 27, the gold price of Chow Tai Fook's pure gold jewelry was 650 yuan/gram, which rose to 703 yuan/gram in just one week, and then climbed to 718 yuan/gram. Although the gold price has rebounded recently, it is still stable above 700 yuan.
The soaring price of gold has discouraged many consumers. May 5 is the last day of the May Day holiday. A reporter from Beiqing Daily saw in a shopping mall in Haidian District that there were few customers at the counters of many gold jewelry brands.
A clerk of a brand store told a reporter from Beiqing Daily that although the gold price has been adjusted a lot recently, the consumption during the May Day holiday has not risen, "Recently, customers who have come to buy gold jewelry mainly wear it themselves, and they are more concerned about style and workmanship, and there are fewer people who care about gold investment." ”
A reporter from Beiqing Daily happened to meet Ms. Zhang's family of three to choose jewelry. Ms. Zhang's daughter said: "Because it's almost Mother's Day, I want to give my mother a gold necklace." Now that the price of gold has risen too high, it feels risky to invest. Another female customer found that the unit price of the brand's gold jewelry had reached nearly 1,000 yuan per gram after calculating the labor cost, and she called it "too expensive", and then reluctantly put down the gold bracelet she had tried on several times.
A clerk at a gold shop in Chaoyang District also said that after the price of gold rose higher and higher, there were fewer customers buying gold with the naked eye, and everyone was becoming more and more cautious, while there were more people consulting recycling or trade-in. Compared with before the Spring Festival, after the gold price rose sharply, business was relatively light.
The latest statistics from the China Gold Association also confirm the feelings of these store staff. On April 26, the China Gold Association released industry data for the first quarter of 2024, showing that the national gold consumption was 308.905 tons, an increase of 5.94% compared with the same period in 2023. Among them, gold jewellery was 183.922 tons, down 3% year-on-year, and gold bars and coins were 106.323 tons, up 26.77% year-on-year. 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.
Is it time to get started?
Looking forward to the future trend of gold, many experts believe that in the long run, there is still support for higher gold prices, but for short-term investment strategies, industry insiders are divided. Some people believe that gold prices may continue to pull back and are not suitable for buying for the time being, while others believe that it is necessary to seize the opportunity to buy on dips.
Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, recently expressed his opinion that the international gold market has fluctuated sideways recently, and the price center has moved down slightly, reflecting that the market is still very different about the trend of gold prices. With the prospect of a larger-than-expected deterioration in macroeconomics and geopolitics, he believes that it is difficult for gold prices to rebound and challenge new highs. Compared with the current real interest rate and policy, the price of gold is still expensive. A better investment strategy is to wait for a significant correction in gold prices in the future and then buy appropriately.
Pan and Lin, a well-known economist, predict that gold will fall sharply and rise slowly in the future, because the Federal Reserve will eventually cut interest rates, and gold prices will still rise in the general direction, but the rise will be very slow. Pan and Lin believe that now is not a good time to buy gold. He also does not advise consumers to consider gold as a preferred investment. In his view, the purpose of investment is that the underlying asset itself can generate income, such as dividends on stocks and interest on bonds, while gold does not have these by-products, and the only profit that gold can generate is the price difference.
Lin Dahui, a senior investment analyst at gold, also believes that it is not suitable to buy gold for investment at this time. He said that due to the large increase in the price of gold in this round, the price correction at this stage is not deep, and the decline should not be over, and it is still not suitable for purchase for the time being.
However, on May 7, UBS Wealth Management's Chief Investment Office (CIO) issued its latest institutional view, calling on investors to "seize the opportunity to buy gold on dips".
UBS said it still believes gold could reach US$2,500/oz by the end of 2024/early 2025, although there is indeed some weakness in the near term. UBS's forecast is based on three main reasons.
First, aggregate demand for gold is resilient and is likely to remain so in the coming months. Total demand rose 3% y-o-y to 1,238t in Q1 2024, despite a 114t decline in global holdings of gold-backed ETFs, data from the World Gold Council showed. Asian ETFs saw modest inflows, with data from the Shanghai Gold Exchange showing a surge in open interest in China in mid-April.
Second, central banks continue to buy gold. According to the World Gold Council, the central bank's "gold rush" continued into Q1 despite rising prices, suggesting that central bank demand is likely to remain the backbone of aggregate demand going forward. Central banks bought around 290t of gold in Q1, higher than UBS's forecast of around 220t per quarter in 2024. These bids hit a record first-quarter high and set the stage for central banks to potentially buy more than 1,000t of gold for the third year in a row.
Finally, downstream demand from retail and corporates could also significantly spur gold buying. There is evidence that jewellery demand has been unexpectedly resilient, while industrial demand has increased by 10% year-on-year in the first quarter of 2024. This could lead to a steady increase in retail and industrial demand in the coming quarters.
"Given the likely frequent and short-lived pullbacks in gold, we think investors can use a structured strategy to buy dips at or below $2,250 to profit if gold recovers to the $2,500 level. UBS said continued geopolitical tensions and the easing of monetary policy in the US by the first quarter of 2025, coupled with the consequent broad-based weakening of the US dollar, should help boost gold prices.
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Text/Beijing Youth Daily reporter Cheng Jie
Editor/Fan Hongwei