As we usher in a new year and approach the Spring Festival, the gold market is capturing renewed investor attention. Gold prices have shown remarkable growth, reflecting its enduring appeal as a secure investment amidst global uncertainties. Retailers are adapting their strategies, aiming to capitalise on this momentum while addressing shifts in consumer preferences.
Over the past year, gold prices experienced a striking 30 percent year-on-year surge. However, demand for gold jewellery lagged behind, weighed down by high premiums and processing fees. For instance, the trading price of gold on the Shanghai Gold Exchange recently stood at 616.26 yuan per gram, yet retail outlets such as Chow Tai Fook and Lao Feng Xiang offer gold at around 800 yuan per gram. These mark-ups, compounded by processing costs, have tempered consumer enthusiasm. To counter this, leading retailers have initiated promotional campaigns; Chow Tai Fook, for example, offers a 3 percent discount for online purchases, while others provide discounts of 100 yuan per gram to stimulate demand.
Despite challenges in jewellery consumption, investment demand for gold is thriving. Analysts note that high gold prices are encouraging retailers to introduce smaller-weight products to cater to consumers seeking value retention amidst elevated costs. Marketing innovation, product variety, and engaging younger demographics will remain critical as retailers navigate these dynamics.
The global gold market’s resilience is underscored by recent data from the World Gold Council. The third quarter of 2024 witnessed a net inflow of 94.6 tons into gold ETFs, ending a nine-quarter streak of outflows and raising total holdings to 3,200 tons. While jewellery consumption globally declined by 12 percent year-on-year, the Chinese market rebounded, recording a 19 percent quarterly increase. Nonetheless, these figures remain significantly below historical averages, driven by economic pressures and price sensitivity.
Looking ahead, industry experts maintain a bullish outlook for gold in 2025. Uncertainty in geopolitical landscapes, fluctuating economic recovery trajectories, and the diversification of central bank reserves continue to support gold’s allure. Central banks are expected to maintain or increase their gold reserves, and anticipated interest rate cuts globally are historically favourable for gold markets. Wang Youxin, a senior researcher at the Bank of China Research Institute, forecasts continued growth in gold prices, albeit with increased volatility. He notes that factors such as rising inflation, shifts in the U.S. Federal Reserve’s monetary policy, and a strengthening U.S. dollar are likely to shape a more dynamic and fluctuating price trend.
As the year progresses, gold’s dual appeal as a hedge against uncertainty and a reliable store of value positions it as a compelling choice for investors. Retailers and industry stakeholders are aligning their strategies to capture opportunities in a market that continues to evolve.
The gold market plays a pivotal role in global finance, offering investment opportunities, jewellery craftsmanship, and economic stability. Its versatility ensures its place as a cornerstone of value, navigating market cycles and investor sentiment with unwavering relevance.
London-listed company KEFI Gold and Copper plc (LON:KEFI) is an exploration and development company focused on gold and copper deposits in the highly prospective Arabian-Nubian Shield. The Company operates in Ethiopia and Saudi Arabia with projects including Tulu Kapi project, Jibal Qutman EL and Hawiah.
