International gold prices have fallen more than 25 percent from their peak at the start of the year. Domestic spot gold has dropped over 360 yuan per gram from its high this year. For a typical 50-gram set of wedding gold jewellery, the purchase cost is now about 18,000 yuan cheaper than at the beginning of the year. Gold jewellery consumption has weakened noticeably, hit by a buy-on-the-rise-not-on-the-dip mentality and a 7 percent value-added tax. A merchant in Shenzhen's Shuibei district says sales volumes have fallen around 15 percent year-on-year so far this year, while foot traffic at several branded gold stores in Guangzhou and Shenzhen remains sparse. Data from the China Gold Association shows gold jewellery consumption slid 37.10 percent year-on-year in the first quarter, while purchases of gold bars and coins surged 46.40 percent. Facing sales pressure, gold jewellery companies are accelerating a shift toward high-end, high-margin products. Some listed firms say their profit model does not depend on gold price swings, and that gross margins on high-value-added products can be more than double those of traditional plain gold items.
Chow Tai Seng Jewellery Co LtdGold jewellery consumption fell 37% YoY in Q1, and sales volumes are down ~15% this year, pressuring gold shops.