Gold Market Faces Challenges as Prices Plummet, Forcing Merchants to Rethink Strategies
In recent weeks, the price of gold has plummeted to its lowest point since June, with sales taking a significant hit. Merchants at the Shenzhen Water Bay Gold Trading Market report a decline of approximately 30% in sales compared to when gold prices were on the rise. This downturn is largely attributed to the "buy on the rise, not on the fall" mentality adopted by consumers, who hesitate to purchase when prices are falling, fearing they might end up buying at the wrong time. As a result, merchants have resorted to reducing their fees to stimulate sales, although the impact has been minimal.
1 July 2025
Business owners have expressed concerns that consumers tend to wait when prices are falling, anticipating further declines, which leaves businesses in a precarious position as they struggle to adapt to the fluctuating market dynamics. The uncertainty of when and if the market will recover compounds the concerns of business owners, making it challenging for them to devise effective strategies to mitigate their losses and stimulate sales. In an effort to boost sales, business owners have attempted to reduce labor costs, but the effects have been less than satisfactory due to labor costs accounting for a small proportion of the gold price.
From a global market perspective, the decline in gold prices can be partly attributed to the net outflow in gold ETFs in May, with institutional investors significantly reducing their holdings, resulting in a substantial decrease in investment demand. However, for consumers who are looking to buy, the current price is more favorable compared to the previous highs, making it a good time to consider making a purchase. There are exceptions, such as the wedding industry, where demand for gold remains strong, and online live streaming sales of gold have also been popular, competing with physical stores and wholesalers.
For consumers, it's essential to adopt a long-term investment perspective rather than engaging in short-term speculative behaviors. Understanding the fluctuations in gold prices and making informed decisions based on thorough research can protect investors from significant losses during downturns. On the other hand, merchants should focus on diversifying their strategies, moving away from reliance on price wars. Improving craftsmanship, design, and product offerings to cater to the younger market and exploring rental services to meet different customer needs could provide a significant boost.
The era of relying solely on price wars to attract customers is fading, and the significant drop in gold prices has exposed the vulnerability of businesses that fail to innovate. Exploring rental services could attract a new wave of customers looking for affordable luxury without long-term commitment. Ultimately, the stabilization of gold prices presents both challenges and opportunities for the industry. By innovating, diversifying, and educating both businesses and consumers, the gold market can navigate these changes and emerge stronger and more resilient than ever. This transformation requires a collaborative effort, fostering a healthier and more dynamic market that benefits all stakeholders involved.
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