Select Language:
Shares of Chinese gold jewelry companies experienced sharp declines as the price of gold continued its downward trend following the release of strong U.S. non-farm payroll data, which heightened expectations for a Federal Reserve interest rate hike.
In Shenzhen, Sichuan Gold closed 5.6% lower at CNY41.23 (around $6.08), after dropping 8.6% the previous day. Shanjin International Gold increased by 2.2%, reaching CNY20.74, although it fell 7.1% yesterday. In Hong Kong, GT Gold Holdings traded steady at 29 HK cents (roughly 4 US cents). Zijin Gold International went up 2.2% to HKD109.40 (about $13.96), while Laopu Gold declined 3.5% to HKD456.40. All three companies saw combined losses of approximately 10.8%, 8.8%, and 5.4% respectively yesterday.
The U.S. labor report for May significantly exceeded forecasts, resulting in a notable rise in market expectations for an interest rate increase by the Fed later this year. International gold prices fell to a low of $4,268 per ounce yesterday, down $1,330 from the peak of $5,598 per ounce earlier this year.
Multiple negative factors have contributed to the decline in gold prices, with the primary driver being the unexpectedly robust U.S. non-farm payroll figures that reinforced prospects for interest rate hikes, according to Wu Zewei, a senior researcher at Jiangsu Su Merchants Bank. The earlier anticipation of Fed rate cuts has largely diminished, strengthening the dollar and boosting U.S. Treasury yields, which increases the opportunity cost of holding gold, Wu explained.
Chinese brands such as Chow Sang Sang, Lao Miao Gold, and Lao Feng Xiang have significantly cut their gold jewelry prices to approximately CNY1,300 ($191) per gram from about CNY1,700. However, the expected surge in consumer demand has not materialized, with store traffic remaining limited.
Data from the China Gold Association shows that China’s gold consumption was 682.73 tons in the first three quarters of last year, representing an 8% decrease from the previous year. Gold jewelry demand plummeted 33% to 270.04 tons, while gold bars and coins increased by 25% to 352.116 tons.
In the first quarter of this year, overall gold consumption rose by 4.4% to 303.29 tons compared to the same period last year. However, gold jewelry demand fell sharply by 37% to just 84.62 tons, while gold bars and coins saw a 46% increase, reaching 202.06 tons. This indicates that even before recent price declines, elevated gold prices had long-term pressure on jewelry demand.
Wang Lixin, CEO of WGC China, previously noted that this structural divergence reflects a long-term trend rather than short-term fluctuations. As consumers reevaluate gold’s value, the line between investment demand and jewelry demand is becoming more distinct.
Wang Yanqing, chief precious metals analyst at Citic Securities Futures, pointed out that increased speculation on rate hikes and geopolitical tensions have put additional pressure on precious metals. Concerns about liquidity stemming from declines in U.S., Japanese, and South Korean equity markets have also contributed to a weekend selloff in precious metals.
Looking ahead, the upcoming release of the U.S. core consumer price index for May will influence market sentiment. The impact of the ongoing U.S.-Iran conflict on inflation and Fed policy will also be closely monitored.
If inflation is brought under control, it could ease some pressure related to rate hikes. Conversely, persistent high inflation might deepen the downward trend for gold prices.
ChatGPT
Perplexity
Gemini AI
Grok AI
