Author | Cui Peng
Some time ago, the price of gold has been rising.
But if you think that those guys who bought gold earlier are making a lot of money, you may be wrong. The fact is that criminal cases involving investments in gold are appearing more and more frequently.
The most striking thing about this is that there is a gold shop that has run away. And behind this gold store is a central enterprise - can a central enterprise also roll up the money? Is it that the central enterprises are not central?
If we take a closer look at this matter, we will get two kinds of news, one good and one bad.
Let's talk about the good one first. The store of the volume is just a franchise store of the brand, and the central enterprises are not yet central. The bad news is that the central enterprise in charge of the signboard has no control over what the franchised stores do, and 97% of its stores are franchised.
In fact, the way gold stores operate is that their largest part of their business is to sell processed gold bars to various large commercial banks. This part of the sales is high, but the gross profit is very low, around 1%. The second largest, and most profitable, business is to sell processed gold jewellery in franchise stores, with gross margins of more than 6%.
The third part is to sell your own gold jewelry in your own shop. This part of the gross profit is relatively high, but it is almost negligible in the proportion of the entire sales.
Through business analysis, you will be surprised to find that the seemingly powerful gold store brands rely heavily on the profits brought to them by their franchise stores, rather than their own stores. And the more the price of gold rises, the more motivated these franchised gold stores are to do something that is not on the table.
This includes the first mentioned store owner to run away with the gold deposited in the store by investors, and it is not excluded that some franchisees have bought their own private goods from non-brand channels when they see the price of gold soaring.
The franchise rate of the company's store is 97%, which is a high number, but it is not isolated. If you roughly count the franchise rate of the more famous gold store listed companies in the mainland, you will find that 97% is not the highest.
The franchise rate of Mingpai jewelry has reached 99%. Others, Zhou Dasheng 94.6%, Lao Miao Gold 94.8%, Lao Fengxiang 96.5%...... None of them are good at stubble.
What does this mean? That is, if you buy jewelry in a famous jewelry brand store in a super city like Beijing and Shanghai, there is at least a 90% probability that the brand will not be able to directly manage the store you enter - from the appearance of the store, you can't tell which one is directly operated and which one is franchised.
After learning this fact, we can look back and think about it, the "Chinese aunts" who sweep the goods in the gold store in the gold price frenzy are actually large leeks.
If Chinese aunts really go to the gold store to sweep the goods, they are buying gold at the price of jewelry gold. The difference between the price of jewellery gold and the price of investment gold has basically widened as the international gold price rises. In other words, the higher the price of gold, the higher the premium for aunts to buy gold. Now it's about 30 percent.
According to the current price of jewelry gold, converted to the international gold price, it has exceeded $3,100 per ounce. This is almost 3% higher than the price expectations of the most bullish gold-bullish institutions.
What's more, the aunts also bear the risk of having a probability of more than 90% entering the franchise store.
Buying gold as an investment in a gold store is really the worst option. Why buy expensive ones when there are cheap ones? If you want to invest in gold, you can go to the bank and buy investment gold bars.
Still, wait, it's better for the thought to be a flash. Because of this kind of gold bar, if you put it at home, you are afraid of being stolen and lost, and the bank will generally charge you.
Paper gold, as an investment, is much friendlier than physical gold bars. You don't have to pay more for it, and you're not afraid of being stolen. Investors can enjoy the full benefits of the entire gold price rise through investment.
Is this what we call the most profitable way to invest? Not at all.
We gave an example of a gold store earlier, in fact, the protagonist is the listed company China Gold.
Looking at the composition of China Gold's business, it has not benefited greatly from the rise in gold prices – its wholesale business has to go with the market, so there is no possibility of significantly improving gross margins. Although the retail business will be better, it will have little impact on the company as a whole because the self-operation rate is less than 3%.
But in comparison, from the beginning of the year to the present, the international gold price has risen by a little more than 10%, while the share price of Chinese gold has still risen by more than 13% under the premise of obvious negative public opinion.
Of course, if that's not good enough, look no further than the companies that make a living out of gold.
There is a listed company in the A-share market, called Zijin Mining, and from the perspective of business composition in 2023, gold mining actually accounts for only 30%.
But the company's share price has risen quite staggeringly. During the period when the price of gold was up 10%, Zijin Mining's share price rose by almost 50%. But that's not all. Since the recent low in October, the gold price has risen by more than 30%, while Zijin Mining's share price has risen by almost 170%.
Nuggets' share price has risen more than the true price of gold is not an isolated phenomenon of individual stocks. Their overall index is up 16% year-to-date (including some companies that don't dig well, and they are even losing money), outpacing the actual increase in the price of gold.
Why is the increase in the share price of Nuggets killing the increase in the price of gold itself?
It should be said that gold investors are already smart people if they can find the advantages of paper gold, but they still forget that although paper gold is good, it has eliminated people's imagination and become interesting. Stocks are different.
As the price of gold rises, the company's earnings increase at the same time as expenses, but when the price of gold rises, people still imagine the increase in earnings from the Nuggets' expansion of production capacity. And, even if the earnings of the companies are not necessarily distributed to all shareholders before the gold price falls, the market is willing to overvalue these companies as if they would be as generous as they imagined.
Comparing several gold investment methods, from the worst to the best: buying jewelry gold, investors can play with the gold in their hands at will; In physical gold, the bank added a porcelain-dense plastic shell to the gold bar; Paper gold, investors can't see gold at all, only a paper gold contract; Stocks, not even gold contracts are gone.
See, investors choose to invest in gold, and the farther away from gold itself, the more profitable they are.
In ancient times, cheating was described, and a wife was not as good as a concubine, a concubine was not as good as stealing, and it was better to steal than to steal. The beauty of investing in gold is somewhat similar to this.
Of course, there is also a very important question, when will the bull market in gold end.
Perhaps some people have thought about finding the answer from the reasons for the rise in gold. The logic is to find the reason why gold is rising, and then once that reason disappears, the price of gold falls.
It sounds reasonable, but when you apply it, it simply doesn't work. Because it's often harder to find out why gold is rising than it is to confirm when it's falling—it sounds like you're moving faster in the mirror than you're real—a little weird, but it's true.
Almost no one can accurately predict the complete process of rising and falling gold prices – maybe a professional has been fooled by chance, but you didn't know he would be right beforehand, so you didn't listen to him; Wait for the next time, you listen to him, he is wrong again.
So, when is it time to sell those Nuggets shares? The answer is: just earn about it!
This is the most ambiguous answer, and it actually works well – remember, you're speculating.
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