The price of gold jewellery broke through the high of $740 per gram, but why did analysts say it would rise?

Jiang Han's vision

2024-05-21 08:10Published in Shanghai

Since the beginning of this year, the rise in gold prices has aroused the attention of the entire market, just recently the price of gold jewelry broke through the high of 740 yuan per gram, such a high price when everyone has been very careful, but analysts said that there is still room to rise, what is going on? What should we make of this?

First, the price of gold jewellery broke through the high of 740 yuan per gram

According to a report by 36Kr, with the continuous rise in international gold prices, domestic gold retail prices have reached a new high. According to a clerk at a Chow Sang Sang store, on May 18, the store's pure gold jewelry was reported at 740 yuan/gram per gram, up 12 yuan/gram from the previous day, "the highest ever, falling by one or two yuan, and rising by more than a dozen yuan." In addition to Chow Sang Sang, the price of pure gold jewelry from gold stores such as Chow Tai Fook, Luk Fook Jewellery, and Chao Hongji also rose sharply overnight, rising by 11-12 yuan per gram.

Not only that, the price of gold jewellery has fluctuated many times this year, according to the 21st Century Economy, a number of gold jewellery processing enterprises lamented to reporters that since the beginning of this year, the demand for gold jewellery sales has experienced "big ups and downs". "We were almost overwhelmed by the aggressive stocking of downstream jewellery retailers ahead of the Lunar New Year holiday in February, but jewellery orders from downstream stores and jewellery retailers plunged sharply after the gold price began to soar in March."

Moreover, while the headlines may have been dominated by gold's record gains this year, it was silver that rose more sharply and faster. Strong financial and industrial demand has benefited the seemingly less "high" precious metal. Silver has surged more than 25% this year, outpacing gold to become one of the best-performing major commodities of the year. Relatively speaking, though, silver is still very cheap. It currently takes about 80 ounces of silver to buy 1 ounce of gold, compared to a 20-year average of 68 ounces.

According to the Securities Times, although the price of precious metals has risen significantly since the beginning of this year, industry insiders are still optimistic about its future performance. And, in contrast, analysts are more optimistic about the future of silver. Some analysts have pointed out that silver may be at the forefront of the strongest upward cycle in history, supported by potential factors such as the widening gap between supply and demand for silver.

Second, analysts say it will rise?

Against the backdrop of ongoing global economic turmoil, the price of gold, as a traditional safe-haven asset, has shown a significant upward trend this year. In particular, jewellery prices, an important part of the gold market, have broken through the high of $740 per gram. However, even at such a high level, many analysts still predict that gold prices will continue to rise, what is the logic and motivation behind this?

First, in recent years, uncertainty in the global economy has been like a dark cloud, hanging over international financial markets. Repeated shocks of trade tensions, supply chain disruptions, and heightened inflationary pressures combine to create a complex and volatile economic environment. Against this backdrop, the value of gold, a traditional safe-haven asset, has become more prominent, and its price has continued to rise. Gold, a precious metal that has long been regarded as a symbol of wealth and security, has once again become a haven for investors to seek refuge in today's financial turmoil.

This trend has been particularly pronounced since the beginning of this year. The ongoing turmoil in the global economy has prompted investors to turn to gold for asset preservation. On the one hand, the increased volatility of global stock markets has made the stability advantage of gold as a non-yield asset visible. On the other hand, monetary policy adjustments in major economies, especially the persistence of low or even negative interest rate environments, have reduced the opportunity cost of holding gold, further boosting demand.

Second, while gold prices, especially jewellery, have reached an all-time high of $740 per gram, some market analysts still expect prices to continue to rise. This judgment is based on several key factors:

First, the Fed's policy expectations, the market is highly sensitive to the Fed's policy direction. While current market expectations may be skewed towards stability or moderate tightening, there are still many uncertainties ahead. In the event of poor economic data, the Fed's interest rate cuts to stimulate economic growth will directly weigh on the dollar, which in turn will push up the dollar-denominated gold price. Historically, a low interest rate environment tends to be positive for gold, as it reduces the opportunity cost of holding gold with no interest yield.

The second is the demand for gold reserves by global central banks, which have increased their gold reserves in the context of heightened global economic uncertainty, especially those in emerging market countries, to diversify the risk of foreign exchange reserves and enhance the stability of the financial system. This massive buying of gold by the official sector has not only directly boosted demand for gold, but also strengthened the market's confidence in the long-term value of gold.

In recent years, the global geopolitical situation has become tense, whether it is the escalation of local conflicts or the strategic competition between major powers, which has exacerbated the uneasiness of the capital market. In such an environment, the role of gold as a safe-haven asset has become more prominent. Whenever there is tension in the international situation, gold prices tend to react quickly, reflecting a stronger appetite for safe assets.

Third, for ordinary consumers, in the face of the high price of gold, the purchase of gold jewelry has entered a high-risk stage. At this stage, how should consumers make an informed choice?

First, consumers need to be aware of the risks of gold investment. While gold has some appeal in the long run as a tool to preserve and increase its value, in the short term, large fluctuations in the price of gold can cause losses for investors. Therefore, when buying gold jewelry, consumers should allocate assets reasonably according to their financial situation and risk tolerance.

Second, consumers can reduce risk by diversifying their investments. In addition to buying physical gold, you can also consider financial products such as gold ETFs and gold futures, which are more liquid and more flexible in operation. At the same time, by diversifying investments, you can balance the risk between different assets and reduce the impact of price fluctuations in a single asset.

Third, when consumers buy gold jewelry, they should also pay attention to market dynamics and obtain gold price information in a timely manner in order to make more reasonable decisions. In addition, choosing reputable merchants and brands is also an important measure to ensure investment security and product quality.

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Personal opinion, for reference only