Han Ximin

1824295095@qq.com

INTERNATIONAL gold prices have had a great run recently, surging to an all-time high of US$2,350 per ounce Monday. Strong physical demand for gold is also fueled by its appeal as a safe-haven asset and investors looking to diversify their portfolios amid lackluster performance in other asset classes.

The Shuibei area in Luohu District, China’s largest hub for gold and jewelry with a well-established industrial chain, is witnessing a boom in sales and a significant influx of shoppers.

Gold rush

Chen Sichen, a jewelry appraiser, has been working in Shuibei for five years. Since the beginning of the year, the number of visitors to Shuibei has increased with the rise in gold prices. “Consumers tend to be more enthusiastic about buying when gold prices are rising because they believe there is still room for the prices to surge, while their willingness to buy decreases when prices fall,” said Chen.

Since the beginning of the year, the gold price had been around 480 yuan (US$66) per gram before the boom and has now exceeded 700 yuan. According to Chen, about 80% of the buyers are individuals who purchase gold for personal use, collection, or investment.

A woman surnamed Yang, who traveled to Shenzhen during the Qingming Festival, believes that gold retains its value even though the current price is high. She bought some gold and jewelry for herself as well asher friends.

At the Shuibei Gold and Jewelry Plaza, a man surnamed Chen, who was selecting gold jewelry products, said that the gold market was relatively stable and gold was indeed a good choice for financial management.

“Compared to previous years, the number of visitors has increased. We had some promotions and waived the craftsmanship fees for some jewelry items. It is quite cost-effective,” said an employee of a Chow Sang Sang store.

“Buying gold here is much cheaper than in branded stores outside of Shuibei. Some shops even offer customization of preferred styles, and there are many original accessories to choose from, with a wider variety compared to branded stores,” said a mother who was searching for a piece of jewelry for her daughter’s 18th birthday next month.

“During the Qingming Festival holiday, people had to wait in line to purchase,” a shop owner at the Shuibei Gold Wholesale Market said.

“On weekdays, there are fewer individual customers, and it’s mostly wholesalers. If it’s a weekend or holiday, the counters are so crowded that it’s impossible to squeeze in,” a store employee said. “Our store sells hundreds or thousands of grams of gold bars every day.”

However, there are many consumers eager to cash in.

“I bought it about two years ago when the gold price was around 380 yuan per gram. Now, the buy-back price is 496 yuan per gram. If I sell 80 grams, I can get over 9,000 yuan more,” a customer said.

Edward Boches, chief innovation officer at Mullen, an independent full-service agency within the Interpublic Group of Companies, said during an interview with Shenzhen Economic Daily that in the short term, gold prices may stay high but face uncertainty in the mid-to-long term. For ordinary consumers, the timing of purchasing gold jewelry may not make a big difference. However, investors should be cautious of the risks that a downturn in gold prices may bring and avoid blindly chasing price increases.

Booming industry

As a Chinese saying goes, “China looks to Shenzhen for its gold, and within Shenzhen, all eyes turn to Shuibei.”

Shuibei, once a fishing village that is now a 15-minute high-speed train ride to and from Hong Kong, has transformed into China’s premier gold capital.

As a key player in the industry, Shuibei supplies more than half of the country’s gold jewelry items. Due to its proximity to Hong Kong, the area has benefited significantly from the influx of capital and technology brought by gold and jewelry entrepreneurs from Hong Kong.

As early as 1981, a Hong Kong businessman established the first gold and jewelry processing facility here that laid the initial foundation for Shuibei to become a gold hub. The industry began to take shape as it gained traction, attracting a varied range of people such as refiners, designers, bullion dealers, researchers, traders, and consumers.

Now, the 1.1-square-kilometer area is home to over 6,000 gold and jewelry enterprises employing more than 60,000 people. Its annual operating revenue exceeds 100 billion yuan, accounting for more than half of the domestic gold and jewelry wholesale market share.

Official data show that in 2023, there were 71,100 gold jewelry-related enterprises operating in China, a year-on-year increase of 46.07%. Shenzhen took the lead with 16,100 gold jewelry-related businesses. Guangzhou and Beijing followed with 9,000 and 4,300, respectively.

Shenzhen has positioned itself as an international hub for gold and jewelry sales. The city is known for its robust gold production and market share. Its physical gold and platinum shipments account for approximately 80% of the physical sales volume on the Shanghai Gold Exchange. Its usage of polished diamonds for jewelry manufacturing represents 90% of the general trade import volume of polished diamonds on the Shanghai Diamond Exchange.