Hong Kong Gold Market in Crisis: Local Jewellers Reversing Business Strategy
• **Increased Demand from Investors and Central Banks**
- Driven by Market Volatility and Trade War Uncertainty
- Investors Rush to Buy Gold as Safe-Haven Asset
- Central Banks Join the Rush, Seeking to Diversify Holdings
• **Local Jewellers Forced to Adapt and Reverse Business Strategy**
- Traditionally Focused on Selling Gold Products
- Now Focusing on Buying Gold from Customers to Make a Profit
- Consequences of this Shift on the Local Market
Hong Kong, a global financial centre, is known for its vibrant gold jewellery market. However, the recent record-breaking price of gold has triggered an unprecedented shift in market dynamics, forcing local gold jewellery shops to reverse their traditional business strategy. Instead of selling gold products to clients, many are now focusing on buying the precious metal from customers to make a profit. The local gold price has skyrocketed to a record high, reaching HK$30,930 per tael troy (US$3,991 for 37.429 grams) before closing at HK$30,710 on Thursday. This marks a 27 per cent increase in the price this year, on top of a 26 per cent increase last year. The price surge has been attributed to the escalating trade war, which has led to market volatility and demand for safe-haven assets.
| Country | Gold Price (per troy ounce) |
|---|---|
| USA | US$1,900 |
| China | US$1,400 |
| Hong Kong | US$3,991 |
The international gold price has also reached a fresh record high of US$3,357.60 per troy ounce (31.10 grams), driven by the same demand for safe-haven assets. According to Brian Fung, CEO of the Hong Kong Gold Exchange, the US tariff policy has led to highly uncertain stock and currency markets, prompting investors and central banks to rush to buy gold. “For Hong Kong jewellery shops, they have to change their usual business strategy, so instead of focusing on selling gold products to clients, the rising gold price means they want to buy gold from customers to make money,” Fung said. “This is an unprecedented shift in market dynamics, and it will have far-reaching consequences for the local market.”
A local jeweller explained, “We used to sell gold jewellery to our customers, but now we need to buy gold from them to make a profit. It’s a complete reversal of our business strategy, and it’s not easy to adjust to this new reality.”
This shift in market dynamics has significant consequences for the local market. With many gold jewellery shops now focusing on buying gold from customers, the demand for gold products is decreasing. This, in turn, has led to a decrease in sales for these shops, forcing them to adapt their business strategy. However, not all local jewellers are struggling. Some have taken advantage of the current market conditions to increase their profits. For instance, a local jeweller reported that they have seen a significant increase in demand for gold bars, which they now sell to customers who are buying gold from them.
| Item | Original Price | New Price |
|---|---|---|
| Gold Bar | US$1,000 | US$1,200 |
| Gold Ring | US$500 | US$600 |
The market shift has also led to a change in consumer behavior. Many customers are now buying gold from jewellery shops, rather than purchasing gold products themselves. This has created a new opportunity for local jewellers to generate revenue. “We’ve seen a significant increase in demand for gold products, which we now sell to our customers,” said a local jeweller. “It’s a win-win situation for both of us.”
As the market continues to evolve, it is essential for local gold jewellery shops to adapt and adjust their business strategy. With the current market conditions, it is clear that the traditional business model is no longer effective, and a new approach is needed to survive and thrive in the industry.
Key Takeaways
• **Market Volatility and Trade War Uncertainty Drive Demand for Safe-Haven Assets**
• **Local Jewellers Forced to Adapt and Reverse Business Strategy**
• **New Opportunities for Revenue Generation**
• **Adaptation and Adjustment Crucial for Survival and Thrival in the Industry**
In conclusion, the recent record-breaking price of gold has triggered an unprecedented shift in market dynamics, forcing local gold jewellery shops to reverse their traditional business strategy. As the market continues to evolve, it is essential for these shops to adapt and adjust their business model to survive and thrive in the industry.
