The price increase can't stop Chinese love for gold! Bar sales hit their highest level since 2019 in Q<>

Author: Liu Xiaoying

Since the beginning of this year, the international gold price has continued to rise sharply, and the current domestic gold jewelry per gram is approaching the 600 yuan mark, an increase of 25% compared with the end of last year. The soaring gold price has not hindered the enthusiasm of domestic consumers.

The World Gold Council's latest Global Gold Demand Trends Report shows that while global jewellery consumer demand in Q478 was relatively flat at 198t, China's total jewellery consumption in Q11 was 56t, up 66% y-o-y and 34% month-on-month. The report shows a significant increase in bar and coin investment demand in China. Q7 bar and coin sales totalled 2019t, up <>% y-o-y and <>% qoq, the strongest Q<> demand since <>.

According to the Gold Association, China's economic recovery has reignited jewellery enthusiasm, after pent-up demand contributed to Q2023 jewellery consumption. For example, wedding jewellery demand has increased as pandemic restrictions have eased: the wedding industry in China has been operating at full capacity since the beginning of <>. In addition, consumers' propensity to save remains at an all-time high compared to other consumer goods, and the financial investment value of gold jewellery continues to attract investors' attention.

In the main data of total retail sales of social goods released by the National Bureau of Statistics from January to March, the retail sales of gold and silver jewelry in the first three months increased by 1.3% year-on-year, and the increase in all commodity categories was second only to Chinese and Western medicines. In March, gold and silver jewelry increased by 13.6%.

Thanks to the rise in the market, the reporter combed a number of listed companies in the first quarter and found that the performance of many companies also picked up. Among them, Lao Fengxiang (600612.SH) achieved revenue of 245.6 billion yuan in the first quarter, a year-on-year increase of 33.17%, and net profit of 7 million yuan, a year-on-year increase of 16.76%; Caibai Co., Ltd. (1.SH) had a revenue of 605599.50 billion yuan, a year-on-year increase of 52.45%, and a net profit of 62 million yuan, a year-on-year increase of 2.35%; Zhou Taisheng (30.SZ) operating income of 57.002867 billion yuan, a year-on-year increase of 41.22%; The net profit was 49 million yuan, a year-on-year increase of 65.3%.

The reporter learned from some industry insiders that unlike the earlier Chinese aunt grabbing gold, in recent years, the main consumer force of domestic gold jewelry has gradually become younger, and young consumer groups have become more and more accepting of gold jewelry.

"From the consumer side, young people's attitude towards jewelry is more pragmatic, and the self-pleasing mentality has been further strengthened. Under the two mentalities, more and more young people have both consumer and investor identities, not only pursuing the self-wearing and expression of jewelry, but also expecting to have certain value preservation attributes and even appreciation space, which is also the reason why gold is favored. Wang Guoxin, deputy general manager of Mengjinyuan Gold and Jewelry Group, said, "Of course, for young consumers, appearance is also very important. At present, the product styles available are becoming more and more diverse and fashionable, and gold is getting rid of the stereotype of traditional old-fashioned, becoming a favorite choice and a highlight for young people. ”

Regarding whether the rising gold price inhibits consumers' purchases, Wang Guoxin said that the current gold price is at a relatively high level and still maintains an upward trend, which will indeed prompt some gold consumers to take a wait-and-see attitude. But he also believes that people's demand for gold consumption has always existed, for example, Chinese used to buy gold jewelry during special festivals such as the Spring Festival to give to relatives and friends, and treat themselves. In addition, as the old saying goes, "buy up, not buy down", although the price of gold has risen in the past two years, it has also made many consumers look at and recognize gold's investment preservation attributes and hedging characteristics, but choose to buy gold products.

The World Gold Council's forecast is that Q2 is the traditional low season for jewellery consumption and jewellery demand is likely to be affected by seasonal factors. The depletion of demand accumulated in previous quarters, coupled with the all-time high local gold price, could impact jewellery demand in China. In addition, "retaliatory" travel spending could also take away from consumers' jewellery budgets.

"The next two quarters are the traditional off-season for gold demand, but physical investment demand for gold is likely to outperform the same period in the second quarter of this year. Our optimism is based on two factors. First, China's continued economic recovery could be beneficial to overall gold consumption growth. Second, global geopolitical risks remain high, and investors are likely to pay more attention to safe-haven assets such as gold, especially against the backdrop of a historically high propensity to save and central banks continuing to buy gold. The aforementioned report said.

Zhang Junhao, chief analyst of the commercial retail & beauty care industry of Guosen Securities, said that the price of gold is negatively correlated with the real interest rate of the Federal Reserve, and as the end of the Fed's interest rate hike approaches, the price of gold may continue to rise, so the demand for physical gold investment will increase sharply in the short term. However, in the medium and long term, gold jewelry will rely on the dual characteristics of personalized accessories and value preservation and appreciation to accelerate the release of consumer demand.

The industry is optimistic about the future. Zhou Taisheng (002867.SZ) said in a conference call with institutional investors a few days ago that in the first quarter of 2023, the sales volume of franchised caliber gold was more than 22 tons, an increase of nearly 40% year-on-year, and it was also the first time to achieve a single quarter of more than 20 tons. The company's operating income and net profit growth guidance in 2023 is 15%~25%, and it is expected to add 400 net stores throughout the year, including general stores and classic stores. It is expected that the overall number of stores will exceed 2023,5000 in <>.