In recent times, the world of gold trading has witnessed a remarkable surge, with gold prices ascending to unprecedented heightsFor instance, on April 8th, the price of 24K gold jewelry sold by Chow Tai Fook jumped from 712 RMB per gram in the morning to 725 RMB per gram by the afternoon, a staggering increase of 1.8% within just a few hoursSince March, prices have escalated from 630 RMB to 725 RMB per gram, marking a 15% riseThis explosive growth in gold prices has not only captured the attention of investors but also fueled consumer enthusiasm, creating a vibrant cycle where increased demand propels prices even higher.

Gold, intrinsically linked with both investment potentials and consumer appeal, operates under dual attributes that influence its pricing dynamicsAs an asset that serves as an international reserve and a commodity for personal adornment, its market movements reveal a complex interplay of economics and psychology

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But who stands to gain from such soaring prices? Let’s explore the landscape of beneficiaries in this booming market.

The primary beneficiaries of rising gold prices are undoubtedly those who sell gold, including individual sellers and corporate enterprisesTo understand this analogy better, consider the real estate market, which also embodies both consumer and investment facetsProperty owners and real estate agencies profit significantly when property values ascendSimilarly, entities such as Lao Feng Xiang, China Gold, and Chow Tai Fook, who are involved in the gold market, also find themselves in favorable positions as gold prices climb.

These companies, acting as intermediaries, maintain a substantial reserve of gold and buy it from upstream suppliers before molding it into elegant jewelry for market consumptionAs gold prices soar, the enthusiasm to purchase naturally increases, leading to augmented sales figures

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These companies have benefitted from advantageous pricing; having previously procured gold at lower costs, the immediate elevation in terminal prices broadens their profit margins.

Examining the stock market, one can see a clear correlation between rising gold prices and the performance of gold-selling companiesFor example, the stock trajectory of both Lao Feng Xiang and China Gold has mirrored one another over the past few months, showcasing notable increases—nearly 30% for China Gold and almost 50% for Lao Feng Xiang—since FebruaryStock prices are often reflective of market expectations, and with rising gold prices, these companies are poised for strong sales outcomes.

Taking 2023 as a case study, the price of international gold, specifically London gold, rose approximately 13%. This marked a rebound following two years of decline, with Lao Feng Xiang reporting a 45% increase in net profits during the first three quarters of the previous year, while China Gold achieved a growth rate of 21% over the same period

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Chow Tai Fook similarly saw a 36% increase, shaping an optimistic outlook for companies poised to report their first-quarter earnings amid the price surge.

However, despite strong sales, uninterrupted increases in stock prices are not guaranteedFor instance, after peaking in mid-March, the stock prices of Chow Tai Fook and Chow Sang Sang began to decline, despite these firms being publicly traded in the Hong Kong market, which is often perceived as having a global perspectiveThis raises questions as to why stock prices for these reputable gold jewelry firms have faltered even as mainland consumer enthusiasm remains fervent.

Additionally, the production side of gold—mining and refining—is critical in the recipient chain of this valuable assetGold is extracted from mines and subjected to refining processes, eventually being fashioned into gold bars for investment or crafted into jewelry for buyers

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Companies involved in the upstream operations of gold extraction are inherently benefitting from inflated terminal prices.

Several A-share companies in China, such as Shandong Gold, Zhongjin Gold, and Henan Zhongtai, specialize in gold mining and refiningThe financial performance of these companies illustrates the lucrative nature of gold mining; for instance, Shandong Gold reported a revenue of 59.3 billion RMB in 2023, reflecting an 18% growth from the previous year, while its net profit soared by an impressive 87%. Similarly, Zhongjin Gold projected a 45% increase in profits.

Notably, the share prices of key gold-mining entities like Shandong Gold and Zijin Mining saw a synchronized upward trend since February, with increases surpassing 60%, significantly higher than the growth rates observed in companies involved in downstream gold sales.

Gold, as a commodity, is inherently limited in supply, especially as extraction rates cannot expand rapidly in the short term

This limitation allows upstream producers to capitalize on price increases more effectively than downstream sellersThis pattern can also be observed in other sectors, like solar energy and battery production, where upstream materials such as silicon and lithium become more profitable when demand surges.

When considering gold reserves on a national scale, it’s evident that countries with significant stockpiles reap the most rewards from rising gold pricesFor instance, the United States boasts the largest official gold reserves at 8,135 tons, making up 68.9% of its foreign exchange reservesMeanwhile, Germany, Italy, France, and Russia follow suit, owning substantial gold reserves as wellChina, ranking sixth globally, has been actively increasing its gold reserves, growing from 2,092 to 2,235 tons over a six-month period.

Arguably, the most significant beneficiaries in this gold craze are not just the corporations or nations hoarding gold but also the everyday investors—particularly those Chinese women who were dubbed "gold moms," who invested heavily in gold over a decade ago

Between 2004 and 2011, gold prices soared dramatically—rising from around $400 to $1900 per ounceWhile these investors may have faced challenges during the subsequent market recalibration, they stand to gain significantly now as prices erupt once again.

Over the past few years, London gold prices have consistently held above $1900 per ounce, signaling a potential payoff for these investors who were previously trapped at high pricesFor example, Chow Tai Fook reported that gold prices peaked at 460 RMB per gram over 11 years agoA subsequent crash saw prices dip to as low as 270 RMB, illustrating a 40% dropThe road back to historical highs is long and fraught with challenges, but as a burgeoning market cycle undergoes rejuvenation, these once-token investors may see their fortunes turn.

Interestingly, while profit is often the end game, merely breaking free from a prior investment slump can bring immense relief and joy

The emotional toll of such sustained losses can be debilitating, yet the prospect of redeeming previously stagnant investments can spark enthusiasm and optimism.

As gold prices continue their dizzying ascent, the market is rife with speculation about the futureSome are bold enough to predict that prices could soar to $3000 per ounceHowever, a healthy skepticism remains, as history shows that swift spikes often precede correctionsThe fear surrounding volatile assets, whether they are real estate, cryptocurrencies, or stock markets, often serves as a cautionary tale reminding investors to tread carefully.

Investment strategies are fundamentally challenging due to the unpredictable nature of timing the peaks and troughs in the marketOne may recognize the likelihood of a return to equilibrium following a parabolic rise, yet pinpointing exactly when that inflection point will occur remains tantalizingly elusive.

This ongoing gold boom poses questions about whether new investors, lured by the current upswing, might find themselves in similar predicaments to those who faced losses in prior cycles