China’s gold jewelry demand: Economic factors and generational preferences

Recent financial results from Chow Sang Sang and Chow Tai Fook – two of the biggest jewelry houses in Greater China – highlight a curious trend: Chinese consumers seem to be stepping away from gold. Chow Sang Sang reported a 13% YoY drop in revenue for the first half of 2024, coupled with a 40% plunge in net income. Meanwhile, Chow Tai Fook managed a 15% YoY revenue increase, driven largely by its performance in Mainland China, but its same-store sales dropped significantly in Hong Kong and Macau. These results point to a question at the heart of China’s luxury jewelry market: Is the declining demand for gold a product of the country’s economic slowdown, or is it rooted in a broader shift in consumer sentiment? Diminishing appeal? The context is crucial. Gold prices have surged over the past 18 months, currently hovering around $2,500 per ounce, up more than 20% from the beginning of the year. In renminbi terms, gold has become even more expensive, surging by 37% since 2023. Yet, despite this rise, demand for gold jewelry in mainland China has dropped. In the first quarter of 2024, Chinese consumers purchased 184.2 tons of gold jewelry, down 6% from the previous year, according to the World Gold Council (WGC). These figures suggest that something larger is at play than just price sensitivity. One explanation is the broader economic climate. China’s post-pandemic recovery has been slower than expected, with weak domestic consumption, a beleaguered housing market, and lower-than-anticipated economic growth. With rising uncertainty about the future, consumers may be holding back on non-essential luxury purchases like gold jewelry. Instead, they may be opting to hold onto cash or shift toward lower-premium products such as gold “beans” and coins, which have seen a sharp increase in sales. This shift suggests that gold's traditional role as a “safe haven” investment may still hold, but in a different form. However, this isn’t the whole story. There’s an argument to be made that consumer optimism, rather than pessimism, could be contributing to the drop in demand. As confidence in the economy picks up – even at a slow pace – people may feel less inclined to buy gold as a hedge against instability. Gold, after all, is often a refuge in uncertain times. If consumers sense that China’s economy is stabilizing or improving, the perceived need for “safe haven” investments like gold may diminish. Another factor to consider is market saturation. Chinese investors have been significant buyers of gold in recent years, accumulating large reserves as global economic uncertainty loomed. In the first half of 2024, sales of gold bars and coins surged 46% YoY to 213.6 tons. Many of those who might typically purchase gold jewelry as both an investment and a luxury product may already have built up significant gold assets, leading to a natural cooling-off period in their purchasing activity. Shift to affordable luxury Additionally, rising prices are playing a significant role in weakening demand. According to the China Gold Association (CGA), gold jewelry purchases fell 27% in the first half of 2024, as rising geopolitical tensions and economic uncertainties pushed gold prices to record highs. Overall, China’s gold consumption fell by 5.6% compared to the same period last year, reaching 523.8 tonnes, with jewelry accounting for 270 tonnes of that total. While older generations have traditionally viewed gold jewelry as both an investment and a symbol of status, younger consumers – more price-sensitive and style-conscious – are shifting to other forms of luxury consumption, including silver or personalized jewelry, as well as experiences over material goods. This brings us to a key question: What can brands like Chow Tai Fook and Chow Sang Sang do to navigate these headwinds? For one, the shift in consumer behavior offers an opportunity for innovation. As younger generations continue to seek out products that align with their personal style and values, brands that invest in new designs, leverage technology, and engage with consumers through digital channels are likely to fare better. Chow Tai Fook’s online collections, which accounted for 57% of its e-commerce revenue in the first half of 2022, demonstrate how digital transformation can be deployed to capture new consumer segments. At the same time, gold’s allure is far from fading entirely. Younger consumers still express a desire to purchase gold, especially as a marker of status, or cultural tradition. However, they are likely to be more selective about when and how they buy it. This underscores the importance of targeted marketing that resonates with evolving tastes and lifestyles. For example, heritage and tradition can still be powerful selling points, but they must be balanced with modern designs and personalization options that appeal to millennial and Gen Z buyers.

Is China turning away from gold jewelry?

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Is China turning away from gold jewelry?