Spot Gold Erases Year-to-Date Gains! On-the-Ground Investigation in Shenzhen's Shuibei: Gold Price Decline Actually Warms Up Jewelry Counter Traffic, Some Investors Seize the Opportunity to Bottom Fish

Everyday Economic News Reporter | Zhao Jingzhi Everyday Economic News Editor | Chen Junjie

On March 23, domestic gold prices fell below 1,000 yuan per gram. By the close of trading, Shanghai gold futures contracts dropped 8.62%, to 940 yuan/gram. International gold prices also declined, with spot gold falling a total of 10.52 last week, marking the largest weekly decline since March 1983.

Despite the sharp drop in gold prices, a wave of enthusiasm is surging at the Shui Bei Gold Jewelry Counter in Shenzhen, contrary to the market trend.

On the morning of March 23, the “Daily Economic News” reporter visited the Shenzhen Shui Bei gold market and found that the gold jewelry counters were bustling with customers, with some merchants conducting live sales simultaneously. Overall foot traffic has significantly rebounded compared to previous periods. One customer told the reporter, “Gold prices have dropped just in time to buy ‘hardware’ (metal materials). If they fall a bit more, the cost of buying jewelry will be even lower.”

A gold material supplier told the reporter that recently, many investors are buying gold, “but given recent oil prices, I estimate there is still some room for gold prices to fall.”

Everyday Economic News Reporter Zhao Jingzhi Photography

Foot traffic in the gold jewelry area has clearly increased

Recently, international gold prices have fallen sharply for four consecutive trading days, with domestic gold prices declining in tandem. The reporter noted that today, Shanghai gold futures prices dropped by 8.62%, equivalent to a decrease of 88.66 yuan per gram compared to the opening.

The decline in gold prices has also affected consumer sentiment. On March 23, the reporter visited Shui Bei in Shenzhen. Despite it being a Monday, the gold jewelry counters were busy, with more visitors than when prices peaked at 1,200 yuan. Some customers were asking the clerks about the future trend of gold prices, worried about buying at a high point.

The reporter observed that, in terms of product categories, traditional jewelry such as gold bangles, necklaces, and rings remain popular choices, while craft products like 5G gold and ancient-style gold are also favored. Some merchants said, “Now, many customers are exchanging gold; if they have gold bars, they can just pay the difference to exchange for jewelry.”

Another merchant suggested that for small-weight jewelry, there’s no need to worry too much about gold price fluctuations. However, for products over 50 grams or 100 grams, comprehensive consideration is necessary.

Gold’s gains this year have been fully wiped out, with some high-position investors replenishing their positions to lower their average costs

Since the beginning of this year, international spot gold has risen by nearly 30% at its peak, but with recent continuous declines, all gains have been completely erased. Unlike consumers buying jewelry, investors are more hesitant.

Some investors said they had taken profits at high prices earlier and are now considering re-entering physical gold. Others are starting to buy the dip, “Gold prices have fallen these days, and more people are jumping in. One customer bought 2 kilograms of gold at once,” a merchant told the reporter.

A business that mainly recycles gold bars also revealed that many clients who entered at high prices are lowering their average costs through additional purchases, “For example, clients who bought at over 1,200 yuan now buy more gold to reduce their costs. If they have sufficient funds, they don’t recommend rushing to sell.” The merchant also pointed out that some clients with a cost basis around 300 yuan are choosing to cash out now.

Regarding the volatile market, some investors admitted to feeling conflicted, “No one knows where the bottom is. I’m afraid to buy at the middle, but I also don’t want to miss out. The key funds are limited.”

Regarding recent gold price declines, Yuan Zheng, a precious metals researcher at Galaxy Futures, told the reporter that the main reasons are twofold: first, the Middle East situation has driven up oil prices, triggering expectations of interest rate hikes, and the US dollar index, especially in Japan and Europe, is more affected by crude oil shocks, creating a strong dollar demand for oil resources, which strengthens the dollar index and suppresses precious metals; second, speculative long positions in precious metals were extremely crowded earlier, and liquidity shortages have triggered panic selling and stampedes.

Changing safe-haven logic? Industry insiders: More due to short-term trading strategy shifts

International tensions continue, yet traditional safe-haven assets like gold are falling instead of rising.

Yuan Zheng explained that the long-term upward logic of gold has shifted from its traditional “hedge” attribute to a deeper “currency credit restructuring,” mainly reflected in three aspects.

First, de-dollarization and central bank gold purchases, which are the strongest medium- to long-term supports. As geopolitical risks normalize, non-U.S. central banks (especially emerging markets) continue to increase gold holdings to avoid sanctions and enhance financial security. Although recent gold purchases have slowed, this strategic trend is far from over.

Second, the weakening of US dollar credibility: with high US fiscal deficits and the weakening of the technological support in the “three pillars” of the dollar, the dollar’s credit system is eroding. Gold, as an asset not constrained by a single sovereign credit, is being revalued.

Third, stagflation hedging and systemic risk: under the potential risks of “high inflation and low growth” in the global economy, gold’s anti-inflation properties will be fully utilized. Additionally, gold serves as a hedge against the collapse of the international order and sovereign credit currency risks.

“Although recent gold prices have experienced significant corrections, overall, the long-term upward logic has not changed markedly. The decline is mainly due to a shift in short-term trading strategies, and the long-term fundamentals are temporarily suppressed,” Yuan Zheng said.

Zhou Puhan, an analyst at Huafu Securities, stated that the current strengthening of oil prices and increased inflation expectations are transmitted to liquidity and risk appetite. During this period of conflict, the US dollar and cash may better meet safe-haven needs. Moreover, this week, market expectations for Fed rate cuts have weakened, with US February PPI rising more than expected, and Fed Chair Powell adopting a hawkish stance, even hinting at rate hikes. Changes in real interest rate expectations and tightening liquidity environment have put heavy pressure on gold.

“After liquidity shocks, the long-term support for gold still exists. On one hand, central bank gold purchases provide solid support for prices. On the other hand, if the war continues to drain resources, it will increase US military spending and fiscal burdens, depleting US dollar credibility and promoting de-dollarization,” Zhou Puhan concluded.