Summary of Key Points
Recently, several gold brands have released their financial results: Lao Pu Gold still saw growth in the first half of the year, but the rate of growth has significantly slowed down (251% and 285% year-on-year last year, compared to only 60%-65% and 83%-85% this year). Brands such as Chow Tai Fook and Zhou Sheng Sheng have managed to maintain growth by offering gold products with variable prices, taking advantage of the price correction in the gold market. This trend is driven by a sharp decline in gold prices in the second quarter of 2026 from historical highs (spot gold prices fell by 14.1% in that quarter, and domestic retail prices for pure gold dropped from 1700 yuan per gram to below 1300 yuan). As a result, consumer demand has shifted from fixed-price products to those with variable prices. At the same time, the industry is experiencing increased differentiation, with leading brands enhancing their resilience to economic cycles through new product launches and strategic transformations, while smaller brands face pressures on both inventory levels and customer footfall, accelerating their exit from the market.
1. Divergent Performance: Slowing Growth for Established Brands, Stability for Chow Tai Fook
The high growth of established gold brands last year was largely due to the surging gold prices (income increased by 251% in the first half of 2025). However, with the recent decline in gold prices, their growth rates have slowed significantly. In contrast, brands like Chow Tai Fook and Zhou Sheng Sheng have capitalized on the lower gold prices: Chow Tai Fook saw a 38% increase in same-store sales of variable-price gold products in the Chinese mainland and a 63.7% increase in Hong Kong and Macau. Zhou Sheng Sheng also reported that mainland consumers prefer variable-price gold, with retail sales increasing by 16%. In short, established brands benefited from rising gold prices last year but are now facing less favorable conditions; Chow Tai Fook and others have managed to stabilize their performance by tapping into the increased demand resulting from lower gold prices.
2. How Do Gold Price Fluctuations Affect Your Gold Purchases?
- When Gold Prices Soar: Consumers tend to favor fixed-price products, such as those made using traditional methods, as they perceive gold as a hedge against inflation and are willing to pay more for design and brand value.
- When Gold Prices Fall: Variable-price gold (sold by weight) becomes more popular. For example, gold jewelry for weddings or daily wear is cheaper when the price per gram decreases, thus stimulating demand from segments previously suppressed by high prices. Data from Chow Tai Fook shows that the proportion of variable-price products in sales increased from 61.5% to 67.2% in the mainland and from 64.4% to 70.1% in Hong Kong and Macau.
3. Is Variable-Price Gold a Lifesaver or a Burden?
Variable-price gold can help boost sales, but it comes with a significant downside: thin profits. The main profit margin comes from processing fees (e.g., a few dozen yuan per gram of gold), whereas fixed-price products (like Chow Tai Fook’s “Wan Xiang” series) generate much higher profits through design and brand value. While variable-price gold is selling well currently, long-term reliance on this strategy can increase financial pressure for companies, as high sales volumes do not necessarily equate to substantial profits.
4. How Are Leading Brands Responding to Gold Price Volatility?
- Lao Pu Gold: Adopting a “precision strategy” by launching new products, targeting wealthy customers, and optimizing store operations (closing less profitable stores and opening new ones) in hopes of improving performance in the second half of the year.
- Chow Tai Fook: Moving away from relying solely on variable-price products and focusing on brand transformation. For instance, the “Wan Xiang” series launched in April sold for HK$870 million in just one quarter, exceeding expectations. The company’s approach emphasizes selling gold jewelry with both design and brand value, allowing them to earn more regardless of gold price fluctuations.
5. Industry Consolidation: Are Smaller Brands on the Brink of Disappearance?
With significant gold price volatility, smaller brands are struggling: their inventory is devaluing (as gold prices fall), and they struggle to attract customers (consumers prefer established brands). Leading brands are taking this opportunity to transform and move away from competitive homogenization in the gold market, enhancing their resilience. As a result, many small gold shops may close, leaving only those with strong brands and substantial capabilities standing out.
In summary, the gold industry is currently in a period of instability. Gold price fluctuations influence consumer choices, and companies must balance volume growth with profit generation. Leading brands are adapting through transformation, while smaller brands are being phased out. For individual consumers, buying variable-price gold is more cost-effective when prices fall, and fixed-price products offer better value preservation when prices rise. However, choosing a leading brand remains the safest option regardless of the market conditions.