Amid rising prices, lower sales, China's gold jewelers show glint of creativity
Chinese demand for gold jewelry has taken a hammering amid an uncommonly sustained surge in gold prices, according to the World Gold Council China. "The major challenge we've encountered in the past two quarters is the continuous rise to historic highs in gold prices, with virtually no corrections," said Wang Lixin, chief executive officer of the council.
The China Gold Association reported a 27 percent decline in gold jewelry purchases in the first half of this year as a cocktail of geopolitics and economic uncertainties drove gold prices to levels never seen before. Consumers' wait-and-see attitude in the world's largest producer and consumer of gold is fed by uncertainty about where gold prices will go next.
Gold futures ended last week higher after US Federal Reserve Chairman Jerome Powell on Friday told an annual US symposium of central bankers and economists that the "time has come for policy to adjust." His remarks were interpreted to mean that the official interest rate in the US is poised to be lowered, though the Fed chairman wasn't specific about timing or level.
Gold futures in New York rose to a record US$2,548. Lower interest rates, which hint at a weakening US economy, deflate the US dollar and tend to make yield investments like stocks and government bonds less attractive, causing some investors to buy gold as a "store of wealth." "We have experienced sudden spikes in gold prices before, but we've never seen them sustained at these levels," said the gold council's Wang. "This has led to a market phenomenon that we could not have anticipated."
In the first half of this year, China's gold consumption decreased 5.6 percent from a year earlier to 523.8 tons, according to the China Gold Association. Gold jewelry purchases in the six months ended June 30 dropped 27 percent to 270 tons, with purchases veering from high-end jewelry to lower-premium gold bars and coins. Sales in bars and coins, however, surged 46 percent to 213.6 tons as some investors sought a traditional "safe haven" for their money.
But how does this all play out at the grassroots?
In the market area around Yuyuan Garden in Shanghai, gold and jewelry shops line Lishui Road. Shop clerks meticulously marked the daily price of jewelry gold on desk calendars as it rose to a peak of 745 yuan (US$104) per gram. "I just wanted to check out some gold bracelets, but the prices have skyrocketed so quickly. I think I'll wait a bit," said a tourist browsing the shops in Yuyuan Garden.
"It's pretty unbelievable – it was just over 500 yuan one year ago," another tourist remarked.
Jewelry retailers are indeed feeling the pinch. Since mid-March this year, the share price of Hong Kong-based Chow Tai Fook Jewellery Group has plummeted by about 43 percent, wiping out nearly HK$56 billion (US$7.2 billion) in market value.
Compared with the share price peak at the beginning of 2023, the company's capitalization has lost nearly HK$100 billion. Other prominent jewelry brands like Luk Fook, Chow Sang Sang and Lao Feng Xiang have experienced similar declines. "In response to the current market challenges, it's crucial to remain proactive," the gold council's Wang emphasized. "Despite high gold prices, there is a need to innovate and create special products because consumer demand for beauty and better products never wanes." The Chinese passion for pure gold – its luster, its financial worth and its symbol of good luck – goes back centuries.
So how to keep consumer demand for gold jewelry buoyant?
One innovation is called "hard gold" technology, which address the inherent softness of pure gold by increasing its durability and enhancing its application in jewelry design and manufacture. A trace amount of alloy is added to pure gold to improve its hardness, making the jewelry less prone to scratching and deformation, and allowing for more delicate and exquisite craftsmanship, such as stylish gem-mounting and enamel-coating.
With this technology, 24-karat gold products can be hollow or three-dimensional, while still hard and firm. Lighter in weight, and bigger in appearance with more designs, hard gold products can be sold at more affordable prices while retaining their investment value.
"With the same design and size, it's not as heavy as it used to be," Wang said. "That way, consumers can purchase beautiful gold pieces within a more affordable range." China's young generation has become a major focus of the gold jewelry market in recent years.
The China Gold Association's 2023 "China Gold Jewelry Retail Market Insights" report revealed a significant shift in the demographic of consumers. People aged 18 to 34 dominated gold purchases, with their share of the market soaring to 59 percent from 16 percent.
The association forecasts that the under-25 "Generation Z" will soon be the nation's most prolific gold jewelry buyers. This group shows a strong preference for jewelry designs that express individuality, indicating a shift in market trends toward more personalized and contemporary gold pieces.
"The first step is to truly understand our consumers," said Dong Gang, director of research and development at Guangdong-based CHJ Jewelry. "Especially the younger ones, who place a greater emphasis on genuine experiences and their personal feelings."
One of CHJ Jewelry's hit products is the "First Pot of Gold" series, featuring tiny gold beans, bars and eggs, weighing just 1 to 2 grams each. This collection is particularly popular among young consumers who, despite having limited budgets, are eager to invest in gold.
The series offers an accessible entry point into gold investment, catering to those who want to start small but still participate in the precious metals market.
"We aim to use hard gold technology to create products that are both simple and meaningful, yet stylish, lightweight, and affordable," said Cao Guoqi, vice president of Zhejiang-based Mingr Jewelry. "This approach is designed to resonate with the younger consumer demographic, meeting their current demands for individuality and accessible luxury."
Mingr's latest necklace, the "Princess," features a lace-like water droplet wave pattern, a design made possible only by use of hard gold technology. This intricate craftsmanship showcases the innovative potential of hard gold, allowing for delicate and complex designs that traditional goldsmithing techniques cannot achieve.
"Social lives expand, and young consumers find more occasions where they want to wear jewelry," said the Gold Council's Wang. "For industry players, the challenge is to create an atmosphere that encourages these consumers to incorporate jewelry into their diverse and evolving lifestyles, allowing them to stand out among their peers."
He added, "Despite the many challenges we face today, our research shows that young consumers still have a strong desire to purchase and have a keen interest in products that enhance their lives. In such an environment, it's crucial that we use new technologies to meet their evolving needs."
Source: https://www.shine.cn/