Zheng Lianghao
In the past ten years, with the prosperity of the world economy, the international gold market has entered the fast lane of development. Gold demand and consumption records have repeatedly reached new highs, and the international gold price has also increased. It soared from less than US$300 per ounce in 2001 to a peak of US$1,921 per ounce in 2011. The 2011 "Gold Demand Trend Report" released by the World Gold Council shows that global gold demand reached 4,067.1 tons in 2011, with a value exceeding US$200 billion for the first time, of which gold jewelry demand was 1,962.9 tons, with a value of US$99.2 billion, setting an annual high (Figure 1, Figure 2). The latest report shows that even under the current severe global economic situation, gold demand in the first three quarters of 2012 still reached 3,185 tons, worth nearly US$170 billion. Gold, an ancient metal, is bursting with dazzling brilliance and becoming the focus of people's eyes.
Figure 1 Global gold demand from 2009 to 2011
Data source: Thomson Reuters GFMS, WGC
Figure 2 Global gold demand for jewelry from 2009 to 2011
Data source: Thomson Reuters GFMS, LBMA, WGC
1. Gold moves from west to east
While the scale continues to expand, the supply and demand structure of the gold market also changes is constantly evolving. There is a common misunderstanding in society that gold prices are mainly determined by Western institutional investors. In the short term, this view may sometimes hold true in terms of the size of individual trades at the institutional level. But in the medium to long term, it is just one of many equally important drivers. Likewise, people tend to focus on investment demand and often overlook the fact that gold jewelery has always been the main source of demand for gold. In addition, whether it is gold jewelry purchases, central bank activities or investment demand, gold market fundamentals used to reflect events and activities in North America and Europe, but over the past 40 years, the focus has greatly deviated from these two centers. The rise of high-growth economies such as the BRIC countries (Brazil, Russia, India and China) has weakened Western influence. This shift is undoubtedly very prominent in the gold market. As important gold producers, the total gold production of China, Russia and Brazil reached 650 tons in 2011, accounting for 1/5 of the global total production. As the world's two largest gold consumers, India and China have an annual gold demand of more than 1,500 tons. Judging from the market situation, China, India and Brazil all have exchanges for trading precious metal spot and futures, and they have all gained world attention in a short period of time. Russia is also stepping up its efforts to launch spot and derivative trading varieties of precious metals. In addition, the official gold reserves of the BRIC countries have also increased year by year. As of 2011, the total official gold reserves of the four countries reached 2,528.6 tons, of which China had 1,054 tons, Russia had 883 tons, India had 558 tons, and Brazil had 33.6 tons.
A study by the World Gold Council shows that over the past 40 years, gold supply has shifted from being relatively concentrated geographically to being geographically dispersed, especially gold mine production (Figure 3). The production of gold mines in supply has decreased, and the gap is filled by recycled gold. In addition, as recycled gold transactions are more convenient and cheaper in emerging markets, the proportion of recycled gold supply from emerging markets is on the rise.
Figure 3 Gold mine output distribution (by region)
Data source: Thomson Reuters GFMS, WGC
On the other hand, the geography of gold demand The focus has shifted significantly. By reviewing the demand situation at the beginning of each decade since the gold price was decoupled from the US dollar for 50 years, it is not difficult to find that gold demand has shifted dramatically from North America and Europe to the Indian subcontinent and East Asia (Figure 4). In 1970, demand in North America and Europe accounted for 47% of global demand, rising to 68% in 1980 and falling to 27% in 2010. The share of the Indian subcontinent and East Asia rose from 35 in 1970 to 58 in 2010.
Figure 4 Gold demand distribution (by region)
Data sources: Bloomberg, LBMA, Thomson Reuters GFMS, WGC
Investment has once again become important in demand Components (Figure 5), investment demand in 2010 accounted for 38% of total demand (excluding central bank purchases). North America and Europe's share of investment demand fell from 74 in 1980 to 45 in 2010, while the Indian subcontinent and East Asia accounted for a large share of the remaining investment demand, reaching 43 in 2010, with China being the fastest growing investment One of the markets. However, in the aftermath of the 2008 financial crisis, Europe's gold demand trend picked up again and it once again became an important player in the gold investment market.
Figure 5 Investment demand distribution (by region)
Data source: Thomson Reuters GFMS, WGC
Gold jewelry demand is "gold moves from west to east" Main force. The share of gold jewelery demand in North America and Europe fell from 44% in 1970 to 14% in 2010, while at the same time, the share of gold jewelery demand in the Indian subcontinent and the Far East increased from 36% in 1970 to 66% in 2010 (Figure 6). Even with the current severe economic environment, India and China still accounted for 57% of global gold jewelry demand in the third quarter of 2012.
Figure 6 Distribution of gold jewelry demand (by region)
Data source: Thomson Reuters GFMS, WGC
2. The soaring Oriental "Golden" Dragon
As the world's second largest economy, China undoubtedly occupies a pivotal position in the international gold market. The rapid development of the national economy has reduced export demand in major markets, while domestic consumer demand continues to grow. China's gold market has maintained a momentum of rapid development since the implementation of market-oriented reforms in 2002, and has experienced a "golden decade" of rapid development. Since 2007, China has replaced South Africa as the world's largest gold producer for five consecutive years, with output exceeding 300 tons in 2011. In the second half of 2011, China became the single market with the largest demand for Golden Ball gold jewelry for the first time. In the third quarter of 2012 that just passed, China's gold demand reached 176.8 tons, second only to India, of which gold jewelry demand was 123.8 tons, accounting for about 27% of global gold jewelry demand (Figure 7).
Figure 7 The proportion of gold jewelry demand in each country in the world in 2011
Data source: Thomson Reuters GFMS, WGC
China’s gold jewelry market is in the “golden decade” "It has also developed rapidly and has mainly gone through two stages: in the first five or six years, with the opening of the market and the improvement of living standards, the demand for jewelry continued to grow among Chinese people; in the past three or four years, the global financial crisis has increased people's avoidance of jewelry. With the rise of risk awareness, the value-preserving function of gold has regained attention and has become another consideration for consumers when purchasing gold jewelry. Therefore, although the price of gold has been rising steadily over the past decade, gold sales have continued to be booming, with an endless stream of gold buyers. In 2011, China's gold jewelry sales were approximately 330 billion yuan. The market size cannot be underestimated. In the future, there is still huge room for growth in this field. The "Year of the Tiger Gold Report" released by the World Gold Council pointed out that China's per capita gold jewelry consumption in 2009 was only 0.26 grams (Figure 8), ranking among the lowest levels in the world. If the per capita gold consumption level in mainland China catches up with India, Hong Kong or Saudi Arabia, then the annual demand in the gold jewelry field alone will increase by at least 100 tons.
Figure 8 Per capita gold jewelry consumption in various countries around the world in 2009
Data sources: GFMS, IMF, WGC
Chinese people have higher requirements for the quality of gold jewelry. At present, the demand for gold jewelry is mainly concentrated in 24K gold jewelry. Domestic brands have become the dominant market. Among them, Hong Kong brands are the mainstream, performing well in the mid-to-high-end and low-end markets. Time-honored brands such as Chow Tai Fook and Chow Sang Sang occupy the mid-to-high-end market, while rising stars such as Jinzhizun are rapidly opening up the battlefield in the second- and third-tier markets. Mainland brands such as Lao Fengxiang and Lao Miao also stand out for their successful interpretations of oriental traditional culture.
The ways for each gold jewelry brand to develop the market can be summarized into three types: first, the brand directly enters large retail malls and opens counters in the form of franchise; second, it opens counters in the form of direct-operated stores; third, it Open counters directly in specialty stores. Since the beginning of this year, many brands have fully liberalized their previously contracted franchises, aiming to quickly open up third- and fourth-tier cities and enter local consumer groups with growing demand. With the continuous advancement of urbanization, these "small cities" are becoming the main driving force for the growth of gold jewelry demand.
3. The ancient and young Chinese gold jewelry market
In China, "loving gold and hiding gold" is a long-standing tradition. Gold has represented good luck since ancient times, and gold is also a symbol of the emperor. Wearing gold jewelry not only shows your status, but is also a traditional way to celebrate a wedding or birthday. The Chinese people's cultural attachment to gold has laid a good foundation for the development of the gold jewelry market.
China’s gold jewelry business was opened in the mid-1990s and was previously a franchise. In recent years, with the prosperity of the overall market, the gold jewelry industry has developed rapidly. Although it has only been ten years, it has already shown great vitality and potential, and also presented unique Chinese characteristics and trends.
Wedding jewelry is mainstream. In the traditional culture of the Chinese nation for thousands of years, gold has always played an important role, whether it is an engagement or a wedding. Gold jewelry symbolizes good luck and wealth, and means "good marriage". It is the "standard accessory" for many couples when they get married. The survey shows that more than half of the newlyweds said they would choose gold jewelry when purchasing wedding jewelry.
Fashion and individuality are the new favorites. The design and craftsmanship of gold jewelry are constantly innovating. The product style is no longer limited to the traditional dignified atmosphere. Modern fashion has become the trend. Gold jewelry with both classical and modern temperament has been favored by more and more Chinese consumers. For example, Only Gold, launched by the World Gold Council in 2007, has attracted the attention of young consumer groups with its stylish design, unique creativity and exquisite craftsmanship. In recent years, with the rise of jewelry customization, gold jewelry has become more avant-garde and individual, which has won the favor of a considerable number of young people who pursue self-labelling.
Diversified sales channels. With the rapid development of the Internet market, e-commerce is becoming a new focus for major jewelry companies to compete for the market. The combination of physical stores and online stores not only facilitates consumers to select and purchase products, but also saves operating costs for enterprises. More and more jewelry companies such as Chow Tai Fook, Chow Sang Sang, Luk Fook Jewelry, etc. have begun to get involved in online marketing and have initially tasted the benefits of this model. The monthly sales of a certain pure gold pendant owned by Chow Tai Fook in its online store reached nearly 1,600 pieces. In the future, with the improvement and maturity of online sales channels, this model will definitely bring huge returns to enterprises.
The demand for investment hedging has increased. As their understanding of the value of gold continues to deepen, Chinese people have begun to pay attention to investment in all aspects of life. In addition to buying gold bars, gold jewelry with profound connotations and meanings as well as investment value is becoming a more common means of wealth preservation for consumers. The 24K pure gold product unique to the Chinese market is the best choice for gold jewelry investment. In addition, the uniqueness of advanced technology, exquisite design and personalized customization also add more collection value and significance to gold jewelry.
4. In the ascendant, making strides forward
In recent years, the great social and economic changes caused by reforms have been accelerating. In 2011, China's per capita GNI exceeded US$5,400 (Figure 9). Following this trend, the domestic middle class will continue to grow in the coming years. The disposable income and savings habits of this important group, linked to rapid urbanization, could double gold demand in China over the next decade. While leading the steady growth of the national economy, the government has been committed to promoting the healthy development of the gold market. In July 2010, the People's Bank of China and six other ministries and commissions issued the "Several Opinions on Promoting the Development of the Gold Market", which clearly proposed the need to enrich trading varieties, improve the gold market system, and promote the formation of a multi-level market system.
Figure 9 China’s per capita gross national income and per capita gold demand
Data sources: Thomson Reuters GFMS, World Bank, WGC
In economic engines and policies With the dual help of support, China's gold market will continue to maintain a good growth trend for a long time and play an increasingly important role on the international stage. The gold jewelry industry will move towards branding and creativity. The international competitiveness of national brands will continue to increase. More and more "Made in China" products will land in the international gold market, showing the charm of the East. With the improvement of the brand, gold jewelry will pay more attention to personality, connotation and design. This change is expected to promote the sales method of gold jewelry from the traditional "price by gram" to "price by piece". Only Gold of the World Gold Council has become a pioneer in this area and has achieved good results.
5. World Gold Council - Promote market development and shape the future of gold jewelry
The World Gold Council is the market development organization for the gold industry and is committed to playing a leading role in the industry and promoting and sustaining demand for gold. At the same time, based on its own accurate market insights, it develops gold-backed solutions, services and markets.
Since establishing an office in Beijing in 1992, the World Gold Council has worked closely with the Chinese gold industry. In the past 20 years, the association has assisted Chinese policymakers in taking the pulse of the domestic market and proposed "China's Gold Market Opening in the New Era: Relevant Policy Research and Suggestions", which helped the central bank form the basic concept of China's gold market opening; it also introduced its own professional research results China regularly publishes the "Gold Demand Trend Report" and cooperates with Thomson Reuters GFMS, Oxford Economics and other institutions to publish a series of industry research reports such as the "Gold Yearbook" and "The Impact of Inflation and Deflation on Gold Trends" , providing industry insiders with a large amount of information and resources for in-depth interpretation of the market. The association also actively responded to the government's policy of "keeping gold among the people" and cooperated with the Industrial and Commercial Bank of China to launch innovative financial products such as "ICBC Gold Experts Accumulation Gold" and "Only Gold Praise Gold Bars".
In the field of gold jewelry, the World Gold Council is committed to rebuilding the value of gold as the ultimate choice for jewelry, attracting a new generation of consumers who will shape the future of gold jewelry, creating new concepts, and guiding new world trends. For a long time, the association has been committed to spreading the advanced practices and promotion concepts of the international market to China, not only deepening the traditional gold jewelry field, but also further exploring the fashion frontier.
In 2003, the World Gold Council launched the "gold jewelry fashion" concept K-gold, and collaborated with jewelry companies such as Chow Tai Fook, Chow Sang Sang, Cai Bai and Just Gold to jointly create 18K gold jewelry with Chinese characteristics, and The introduction of the Gold Expressions series products, which represent Italy's best design level, to China has brought new ideas, new processes, and new innovations to the domestic jewelry industry, promoted the development of Chinese gold jewelry in a fashionable and modern direction, and promoted the 18K gold market. achieved rapid growth.
In 2004, the World Gold Council joined hands with Shanghai Chenghuang Jewelry and other companies to launch Xifu wedding gold jewelry, aiming to promote Eastern culture and integrate modern fashion weddings with traditional Chinese wedding concepts, so that young couples can both Enjoy the passion of modern Western weddings and understand the deep meaning contained in traditional Chinese culture. Since its launch, Xifu has won wide popularity among people with its unique beautiful meaning and exquisite craftsmanship.
In 2007, in order to comprehensively improve the production technology of traditional pure gold products, the World Gold Council proposed the concept of "pure gold products" and launched the gold-only promotion project, joining hands with jewelers such as Lao Fengxiang and Laomiao Gold. Use modern marketing methods to enhance the image of traditional gold jewelry. Only Gold is the first in China to implement the "price by piece" sales method, highlighting the craftsmanship of gold jewelry and encouraging processing companies to invest in design technology. As soon as the brand was launched, it quickly received enthusiastic response from the gold jewelry industry and consumers. In just five years, it established the brand banner of 24K gold jewelry in the industry and became a jewelry choice with both value-preserving properties and rich emotional connotations.
Only gold guides people to gradually shift from focusing only on the value of 24K gold to looking forward to jewelry products with fashionable designs, unique creativity and exquisite craftsmanship, thus further promoting the gold jewelry industry to move towards the high end. In 2011, Weiweijin achieved sales of more than 36 tons and showed a good growth trend.
In 2012, China National Gold Group Gold Jewelry Co., Ltd. and the World Gold Council jointly launched the "Jane·Rujin" boutique jewelry brand. The brand integrates fashion design and classic craftsmanship, and integrates the world's top design concepts with the unique personality and characteristics of Chinese women, making it in line with Chinese aesthetic concepts and better reflecting the charm of modern Chinese women.
While promoting gold jewelry brands, the World Gold Council also focuses on the discovery and cultivation of new forces in the industry. In the past few years, the association and Anglo-Ashanti Gold Co., Ltd. of South Africa have jointly organized three "Golden Visions" (China) Gold Jewelry Design Competition. "Golden Vision" has always been known as the Oscar Award for the gold jewelry design industry. With the purpose of encouraging "Chinese Design" and "Chinese Creation", it is committed to promoting the development and progress of gold jewelry design and gold jewelry processing technology, and strives to try to The bold and avant-garde design of display gold jewelry has been transformed into commercial gold jewelry, enriching China's gold jewelry market.
In the future, in addition to the promotion of gold jewelry and gold investment products, the World Gold Council will continue to contribute to the development of China's gold market, build a bridge between the domestic and international gold markets, and promote the sustainable development and development of the domestic market. Prosperity.