As the Lunar New Year approaches, the global gold market is experiencing a notable surge, reflective of seasonal consumer behavior and market dynamicsOn January 26, COMEX gold futures settled at $2,777.40 per ounce, marking a 0.45% increase and reaching its highest point in nearly two monthsSimilarly, in the London spot market, gold prices approached $2,770 per ounce, tantalizingly close to the historic peak of $2,790 per ounce.
In retail circles, the rise in international gold prices to above $2,700 per ounce has translated into higher prices for gold jewelryOn the same day, prominent retailers such as Chow Tai Fook, Lao Feng Xiang, and Lao Miao Gold had their gold jewelry listings commonly exceeding 835 RMB per gram, while at the Shanghai Gold Exchange, the latest closing price for spot gold AU9999 was around 645.51 RMB per gramYear after year, the months leading up to the Lunar New Year signify a peak in gold consumption as consumers flock to the jewelry stores, eager to purchase gold items as part of the festive celebrations.
Upon visiting several gold retailers in the northwest region, it became evident that the youth demographic is increasingly driving foot traffic and salesThis group shows a particular affinity for lightweight gold jewelry with novel designs, leading to impressive sales figures in these segmentsAs one sales representative noted, “Consumers this New Year are especially interested in zodiac-themed gold ornamentsThis year has seen an influx of new styles that are lightweight and more affordableOur stores have introduced special promotions during the holiday period, including reductions ranging from 40 to 80 RMB per gram, with some brands even offering discounts upwards of 100 RMBAdditionally, there are incentives like 'buy gold, get silver' offers and 20% off on processing fees, which potentially aids in boosting jewelry sales.”
Looking at the broader trend, the international gold prices have been on an upward trajectory for the last four weeks
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Data reveals that from the beginning of 2025 until January 26, COMEX gold futures have climbed over 5%, establishing a consistent rise across four consecutive trading weeksAnalysts from the Jinyafo Gold Research Institute highlight that the recently released U.SConsumer Price Index (CPI) data for December 2024 has contributed to this price surgeWith emerging insights surrounding President Biden’s new policies, worries around uncertainty are easing, thereby supporting elevated gold prices.
Examining futures positioning, there are signs that investors are beginning to take profitsAccording to the latest data from the U.SCommodity Futures Trading Commission, as of the week ending December 17, 2024, long positions in COMEX gold futures decreased by 18,715 contracts or 4.28%, bringing the total to 418,183 contractsNon-commercial net long positions also fell, indicating a potential shift in market sentiment.
Experts in the industry opine that the economic environment in 2025 is still laden with uncertainty, which will likely sustain gold prices at elevated levels, although the intensity of the price increase may not match that of 2024. As of late December 2024, the London spot gold fix was settled at $2,610.85 per ounce, a significant rise of 25.83% from the beginning of the year when it stood at $2,074.90. The annual average price for gold reached $2,386.20 per ounce, a solid increase of 22.97% compared to the same period in 2023.
According to Ming Ming, Chief Economist at CITIC Securities, by mid-2025, the expected price for COMEX gold futures could be around $3,175 per ounce, with an estimated price range between $3,000 and $3,250 per ounce for the yearRecently, analysts at Goldman Sachs also recalibrated their forecasts, lowering their gold price target for the end of the year from $3,000 to $2,910 per ounce due to anticipated reductions in interest rate cuts by the Federal ReserveThey forecast only a 75 basis point decrease within the year, impacting their gold price outlook decisively.
The World Gold Council projects that in 2025, markets will anticipate the Federal Reserve implementing a 100 basis point rate cut by year-end, with inflation expected to ease but remain above target levels
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Central banks across Europe might pursue similar reductionsWith the economy stabilizing, the dollar is projected to remain stable or slightly weaken, while global economic growth is expected to continue on a positive trajectory, albeit below trend levels.
Despite the rising gold prices, the market for gold jewelry finds itself under pressureWith international gold prices reaching unprecedented heights and cumulatively rising nearly 30% throughout 2024, retail prices for gold jewelry in China surged from around 500 RMB per gram at the beginning of 2024, exceeding 800 RMB by year-endHowever, this price escalation has created challenges, as the China Gold Association reported that the nation’s total gold consumption for 2024 was at 985.31 tons, reflecting a year-on-year decline of 9.58%. The consumption of gold jewelry specifically saw a more significant drop, falling by 24.69% to 532.02 tons.
Industry analysis cites that amidst sluggish overall gold and jewelry consumption coupled with declining inventory turnover rates, gold jewelry enterprises were quick to adjust their production strategies and enhance product innovationEmerging concepts such as ancient craft and national trend-themed jewelry gained popularity, particularly as factors like international turmoil and escalating conflicts have heightened gold’s allure as a safe-haven asset, leading to significant increases in bar sales.
Interestingly, consumer preference seems to have pivoted towards gold bars and coinsThe China Gold Association noted that in 2024, total consumption of gold bars and coins reached 373.13 tons, showing an impressive year-on-year growth of 24.54%. Industry insiders highlight a stark contrast in sales dynamics between high-premium gold jewelry whose demand has plummeted versus gold bars and coins which are experiencing a considerable upswing in consumptionThe volatility of high gold prices adds risk to manufacturing and sales ventures, prompting wholesale and retail sectors to curtail inventory, resulting in a notable decrease in production for jewelry processing enterprises.
According to Hua An Fund's analysis, gold remains a significant asset class of interest for 2025. They note that the slowdown in global economic growth and the looming inflation challenges in the U.S. are likely to support gold prices
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