Analysis of the Impact of Sustained Gold Price Increases on the Profitability of Jewelry Retail Enterprises

Based on the collected data and information, I will provide you with a systematic and comprehensive analysis report.

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As of January 19, 2026, the international gold market has shown a strong upward trend. Spot gold prices surged past the $4,640 per ounce mark on January 14, 2026, setting a new historical record[1]. Over the 21 trading days from December 20, 2024, to January 17, 2025, international gold prices rose from $2,609.70 to $2,748.70, representing a 5.33% increase, with a price fluctuation range of $2,618.10-$2,750.90[0].

2025 saw an extremely strong performance in the gold market: London spot gold prices hit a new historical high over 53 times throughout the year, breaking through $4,550 per ounce, with an annual cumulative increase of over 70%, marking the highest annual increase in nearly 46 years[1]. This sustained upward trend has had a profound impact on the entire gold jewelry industry chain.

Domestic gold jewelry prices have risen in tandem with international gold prices. According to market data, per-gram prices of gold jewelry have increased by 75 yuan in just 12 days at the start of 2026[2]. As of mid-January 2026, the per-gram price of 999 gold jewelry from mainstream domestic jewelry brands has generally reached the high level of 1,430 yuan[1].

Taking Chow Sang Sang as an example, its gold jewelry price trajectory clearly shows the upward trend: the per-gram price of 999 gold jewelry was approximately 800 yuan at the start of 2025, rose to 1,213 yuan per gram by October 14, 2025, an increase of about 400 yuan per gram within the year; by January 2026, it had exceeded 1,430 yuan per gram[2].

Shenzhen Shuibei, as the largest gold jewelry wholesale market in China, occupies a core position in the national gold jewelry industry. According to industry data, Shuibei’s physical gold usage accounts for approximately 70% of the total physical delivery volume of the Shanghai Gold Exchange, its physical diamond usage accounts for about 80% of the total import volume of the Shanghai Diamond Exchange, and its operating revenue exceeds 100 billion yuan, accounting for approximately 50% of the domestic gold jewelry wholesale market share[3].

The Shuibei industrial chain is clearly divided into three levels: the upstream is the raw material supply side, which mainly obtains gold raw materials through the Shanghai Gold Exchange; the profit of the supply side is affected by gold price fluctuations, and excess returns can be obtained by hoarding gold at low prices and selling at high prices. The midstream consists of various processing manufacturers covering product production and design links; the per-unit processing profit of gold jewelry is only about 11 yuan, accounting for approximately 7% of the total processing cost, with relatively low value addition in the intermediate link[3]. The downstream includes various retailers and wholesalers.

The transmission of gold jewelry prices from the Shuibei market to retail terminal prices follows the basic model of “raw material cost + processing fee + brand premium”:

• Raw Material Cost: Based on real-time gold prices of the Shanghai Gold Exchange
• Processing Fee: Gold stores adopting the Shuibei model use the pricing method of “market benchmark price + 10-20 yuan processing fee”
• Brand Premium: Well-known brands add an additional markup on this basis

According to the latest data, the per-gram price of gold jewelry in the Shuibei market has risen from 1,126 yuan in early January 2025 to 1,200 yuan, while the per-gram price of branded gold jewelry has exceeded 1,450 yuan[context]. Comparative data from January 2025 shows that the quoted price of a necklace of approximately 9 grams surged from 782 yuan per gram with a 20 yuan processing fee (total price of approximately 7,426 yuan) in August 2024 to 1,205 yuan per gram in January 2025 (total price of approximately 11,000 yuan), with a price difference of nearly 40%[4].

After the implementation of the new gold tax policy in 2025, the transaction pricing mechanism in the Shuibei market has undergone major adjustments. The real-time quotation screens hanging in each major trading hall in the market have been unified to a single “gold” price, canceling the original separate “jewelry gold” and “investment gold” prices[4].

This adjustment has led to: the gap between the public quotation and the Shanghai Gold Exchange gold price has widened to more than 10%; merchants with comprehensive membership qualifications of the Shanghai Gold Exchange can still sell gold bars at investment gold prices, but this does not apply to jewelry products; some merchants offer discounts to regular customers through flexible operations of “lower prices without invoicing”, but this model carries compliance risks[4].

In the high gold price environment, the gross profit margin of jewelry retail enterprises is facing significant pressure. According to industry data, the gross profit margin of traditional retail gold stores has been squeezed from approximately 20% to below 10%, and some jewelry products have almost no profit after deducting taxes and labor costs, barely maintaining operations relying on brand rebates[5].

Enterprise Type/Business	Gross Profit Margin	Characteristics
Lao Feng Xiang Wholesale Business	9.39%	Relatively low gross profit margin
Lao Feng Xiang Retail Segment	23.6%	Relatively high
Laopu Gold (High-End Customization)	Over 40%	Long-term stability
Traditional Jewelry Stores (After Promotional Price Cuts)	Below 10%	Severe decline

This differentiation reflects that the traditional model relying on processing fees and wholesale has extremely limited profit space, while the high-end customization model with brand premium capability has stronger risk resistance.

Since 2025, the gold jewelry industry has experienced intense restructuring. According to market data, Chow Tai Fook has net closed 1,022 stores within nine months, closing nearly 4 stores on average per day; brands such as Chow Tai Seng and Zhou Liufu have also closed their franchise stores one after another; in 2025, listed gold jewelry companies closed at least 3,000 sales outlets in China, and almost all of these closed stores were franchise stores[5].

• High fixed costs: monthly rent of 80,000 yuan, employee salaries plus social security of 15,000 yuan, utilities and property fees, with fixed expenditures exceeding 100,000 yuan
• Sharp decline in operating revenue: some store owners reported that operating revenue has dropped by 20-30%
• Compressed gross profit margin: coupled with rising gold prices, price promotions have led to a decline in gross profit margin from 20% to below 10%

The sustained rise in gold prices has brought a dilemma in inventory management to jewelry retail enterprises:

• The book value of previously purchased gold inventory has increased, but it cannot be realized in the case of slow sales
• If it is to be realized, handling fees must be borne, resulting in losses, becoming “dead money”
• Some gold store owners choose to sell inventory gold at high prices to recoup funds, and even switch industries

• Traditional gold stores: facing the dilemma of “cannot sell, reluctant to sell”
• Gold recycling merchants: no need to hoard inventory; gold received is resold to refineries on the same day, with capital turnover 2-3 times a day, and per-gram gross profit of 1-3 yuan, but with fast turnover, the annualized return is considerable

From the financial data of listed companies, the overall industry is clearly under pressure:

• Market Capitalization: $1.968 billion, Current Stock Price: 45.73 yuan
• ROE: 12.57%, Net Profit Margin: 3.09%
• Q3 2025 Operating Revenue: $1.465 billion, lower than the market expectation of $1.957 billion, a decrease of 25.15%
• Stock price has fallen by 9.09% in the past year[0]

• Market Capitalization: $1.337 billion, Current Stock Price: 12.32 yuan
• ROE: 16.28%, Net Profit Margin: 10.52%
• Q3 2025 Operating Revenue: $218 million, lower than the market expectation of $395 million, a decrease of 44.98%
• Stock price has fallen by 1.99% in the past year[0]

High gold prices have had a significant impact on consumer purchasing behavior. Data from the China Gold Association shows that China’s gold consumption in the first three quarters of 2025 was 682.730 tons, a year-on-year decrease of 7.95%; among which, gold jewelry consumption was 270.036 tons, a sharp year-on-year decrease of 32.50%[1].

• Consumers generally shy away from high-priced gold jewelry
• The “buy on rises, not on falls” mentality has led consumers with non-rigid demand to hold cash and wait and see
• Customers repeatedly compare prices and discounts across different brands, making sales significantly more difficult

In contrast to the shrinkage of gold jewelry consumption, investment demand has bucked the trend with growth:

• Sales volume of gold bars and gold coins reached 352.116 tons, a year-on-year increase of 24.55%
• This is the first time in the past 30 years that domestic gold investment demand has exceeded consumption demand[1]
• Consumers have shifted their gold purchase budgets from gold jewelry to products with stronger investment attributes such as gold bars and gold beans

In response to changes in demand, retailers are actively adjusting their product strategies:

• Light-weight, high-value-added jewelry products maintain strong market appeal
• Brands have launched “fixed-price” gold jewelry, “gold beans” of about 1 gram, and other products
• Small-weight products meet the demand for “saving gold” while lowering the threshold for single purchases

• After the rise in gold prices, the volume of trade-in business has increased by about 20% overall
• The “exchange by weight” policy attracts consumers to exchange old gold for new styles

• Combining gold with other accessories to develop products such as phone chains
• Investment silver bars have become a new hotspot, with some merchants adding silver bar counters

The Shuibei market is undergoing a strategic transformation from traditional wholesale to online retail:

• Shuibei has become a core hub for jewelry live e-commerce
• The 2025 “China Jewelry Capital · Shenzhen Shuibei” Gold Jewelry E-Commerce Live Streaming Season event achieved sales of over 800 million yuan, with exposure exceeding 1 billion person-times
• Zhou Liufu’s online channel revenue reached 1.632 billion yuan, a year-on-year increase of 34%, accounting for 52% of total revenue[3]

• Wholesale-retail hybrid gold stores adopting the Shuibei model have opened in cities such as Chengdu, Chongqing, Nanjing, and Changsha
• Adopting the model of “minimum order of one piece”, with pricing based on “international gold price + 10-20 yuan premium + 10-20 yuan processing fee”
• Mainly located in traditional gold wholesale markets of southern provincial capitals

Facing the pressure of suppressed consumption due to high gold prices, the gold leasing business has become a new growth point:

• The main customer group for leasing is budget-sensitive young consumers, focusing on leasing “five gold items” for weddings
• Purchasing a set of wedding “five gold items” can cost over 100,000 yuan, while leasing can significantly reduce costs
• Leasing schedules are tight, with some popular styles already booked through February 2026[4]

In the high gold price environment, the gold recycling market has seen a significant rise in popularity:

• In July 2025, the total recycling volume of intelligent gold recycling terminals increased by 589% year-on-year
• The Ginza Wisdom Gold Store in Shanghai Global Harbor recorded a gold recycling volume of over 25,000 grams in May 2025
• Intelligent terminals focus on small-weight products starting from 0.3 grams, meeting consumers’ demand for “saving gold”
• The recycling process has become transparent, and in December 2025, the China Gold Association released the “Specifications for Gold Trade-In Business Services”[5]

• Gold prices are expected to remain in high-level fluctuations, and jewelry retail enterprises will continue to face pressure
• Industry integration will accelerate, and small and medium-sized brands and franchise stores will face greater survival pressure
• Live e-commerce and light-asset models will continue to expand

• High-end customization enterprises with brand premium capability will stand out
• Supply chain efficiency will become a core competitive advantage, and the Shuibei model is expected to further spill over
• Supporting services such as gold recycling and leasing will become more standardized

• Gold consumption will transform from “jewelry for value preservation” to “investment allocation”
• Industry profit margins will remain at a low level, with competition focusing on brands and experience
• Technological innovations (such as intelligent terminals, 3D printing) will reshape the industry landscape

1. Price Transmission Mechanism:
   Gold price changes in the Shuibei wholesale market are transmitted to retail terminal prices through the chain of “raw material cost + processing fee + brand premium”. Currently, the per-gram price of branded gold jewelry has exceeded 1,450 yuan, an increase of over 500 yuan from the start of the year.

2. Profitability Under Pressure:
   High gold prices have led to a significant decline in the gross profit margin of jewelry retail enterprises, with the gross profit margin of traditional gold stores dropping from 20% to below 10%, and large-scale store shrinkage occurring in the industry (over 3,000 stores closed in 2025).

3. Changes in Consumer Behavior:
   Gold jewelry consumption has decreased by 32.50% year-on-year, while investment demand has bucked the trend with a 24.55% growth. Consumer preferences have shifted from heavy-weight gold jewelry to small-weight products and investment gold bars.

4. Increased Industry Differentiation:
   The profitability gap between high-end customization brands (gross profit margin over 40%) and mass-market retail brands (gross profit margin below 10%) has widened.

• Focus Targets:
  Jewelry enterprises with brand premium capability and online channel advantages
• Risk Warnings:
  Gold price fluctuation risks, rigid store rental costs, lower-than-expected consumer demand
• Allocation Recommendations:
  In the current environment, the valuation of the gold jewelry sector is under pressure; it is recommended to pay attention to bargain-hunting opportunities for leading enterprises that have fallen sharply

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[0] Jinling API Market Data (obtained on January 19, 2026)

[1] Xinhua Daily “Economic Weekly”: “Gold ‘Surges’, Enter or ‘Wait’?” (January 19, 2026) https://m.sohu.com/a/977539556_121455647

[2] China.com: “Gold Jewelry Per-Gram Price Rises 75 Yuan in Just 12 Days in 2026; Surge in Gold Prices Triggers Industry Adjustments” (January 12, 2026) https://news.china.com/socialgd/10000169/20260112/49156767.html

[3] 21st Century Business Herald: “The Ambition of ‘China Jewelry Capital’: Shuibei Embeds into the World Gold Jewelry Industry Map” (October 17, 2025) https://www.21jingji.com/article/20251017/herald/575484a78e9d0db0125422eb57caca81.html

[4] Yicai Global: “Some Merchants Sell ‘Tax-Free’ Gold; Gold Leasing Booms in Shenzhen’s Shuibei” (January 2026) https://www.yicai.com/news/103006470.html

[5] Tencent News: “My Dad Ran a Gold Store for 6 Years, Says He’s Most Scared Now, Suddenly Envious of Those in Gold Recycling” (January 16, 2026) https://news.qq.com/rain/a/20260116A04PY200