New Phenomenon in China, Young People Hunt for Gold to Save
Diamonds are no longer eternal. That's what young Chinese think. Strong gold holds up for long-term investment.
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A woman walks in front of a gold poster on a street in Beijing, China, February 27, 2024.
Gold shops are usually crowded with mothers or middle-aged women who intend to buy or sell their jewelry. Especially, when approaching the school registration season or Eid al-Fitr. That's in Indonesia.
In China—in the past, as in Indonesia—gold shops also attracted more interest from older people. However, now the view is different.
Currently, many gold shops in the "Land of the Bamboo Curtain" routinely serve customers in their 20s. Even on Xiaohongshu, a social media site favored by Generation Z - those born between 1997 and 2012 - discussions about precious metals are thriving.
Domestic gold prices reached a new high in China last year. There was a gold rush in retail markets, especially in cities with lower economic levels and less affluent regions. Gold is considered a long-term safe investment and is able to withstand economic crises.
Also read: Exciting Commodity Futures Investment, Gold is the Most Successful
The Economist magazine, April 25 2024, said, Chinese young people are starting to look at gold as savings. They choose to save gold rather than save money. The unemployment rate for young Chinese in urban areas reaches 15 percent.
Many companies have also cut their employees' wages. So, these young people hope they can use their savings to invest. However, traditional investments are not meeting their expectations. The stock market is declining. House prices have also been falling for 10 consecutive months.
Residents walk holding umbrellas in front of a gold sales billboard in Beijing, China, April 10, 2024.
In addition, at the same time, the international gold price is skyrocketing. It reached 2,320 US dollars per ounce on April 24, 2024, up 12 percent since the beginning of the year. People in other countries are buying gold due to concerns about inflation and geopolitical issues.
Also read: India and China Buy Up World Gold
The high demand for gold is partly due to the increased demand from the People's Bank of China. This is done to diversify wealth from the US dollar amid strained relations with the US. The Chinese gold market contributes about one-fifth of global gold sales.
China's gold market accounts for about a fifth of global gold sales.
According to the China Gold Association, in 2023, national gold consumption will reach 1,090 tons, an increase of 8.78 percent year on year. Of that amount, gold jewelry consumption reached 706.48 tons, up 7.97 percent from the previous year. Meanwhile, gold bars and old coins reached 299.6 tons, a 15.7 percent increase compared to the previous year.
The young population aged 25-34 years is the main driver of gold consumption, with their proportion increasing from 16 percent to 59 percent in 2023. The association estimates that, in the future, consumers under 25 year olds will be the new big gold buyers.
Gold Prices Throughout April 2024. Source: Logamulia.com
Gold beans
The gold investment made by young people in China is not by buying gold bars or gold coins. They are unable to afford gold bars. What they buy are gold seeds the size of coffee beans or nuts weighing around 1 gram. The price is around 600 yuan or IDR 1.4 million. They buy them at banks and jewelry stores.
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In one of the videos that went viral on social media, a netizen was seen shaking his glass piggy bank containing his collection of gold beans. "The sound of the jingle makes you satisfied. "I can save this gold like beans until I retire," said the netizen.
Apart from gold nuggets, gold jewelry is also increasingly popular. As in many other places, in China gold is considered a luxury item whose value can increase. Not like bags or shoes. By buying gold, young people in China feel they are spending money without spending money.
The gold jewelry that sells well, especially among young girls, is the "China chic" design featuring national symbols such as koi fish and lotus flowers. These two symbols are lucky in China and are popular jewelry items on Xiaohongshu. Beautiful designs with ancient carvings and affordable prices are what attract young people.
"In the past, gold symbolized the taste of the older generation, but now it has become a statement of identity for Gen Z, representing personal style and loyalty to cultural traditions," said Professor at the School of Philosophy and Social Development of Shandong University, Wang Zhongwu.
A man walks in front of a gold sales billboard in Beijing, China, April 10, 2024.
The executive director of jewelry company Chow Tai Fook, Kent Wong, said that gold consumption in China since last year has been driven by products that are lighter than 10 grams or cost less than 2,000 yuan or Rp 4.6 million. The World Gold Council stated that this indicates that the budget of millennials or Gen Z is actually not much.
Also read: Young people have no choice but to "live on the edge"
Many companies have recently released popular series of modern jewelry with Tang Dynasty designs. This is to cater to the tastes of young people who increasingly see gold as a safe investment in the midst of an uncertain economy.
"Buying gold is like saving money in another form. It's difficult to save money in cash. Gold has a higher value than other options. In the past, I used to buy luxury products, but it turned out their value decreased and it was difficult to sell," said Zhang Jie (30), a freelance worker in Shanghai.
The millennial and Gen Z generations, according to Nikos Kavalis, a research consultant at Metals Focus in the UK, have been a strong driving force behind the increasing popularity of gold in recent years. The latest consumer research from Chow Tai Fook also shows that Gen Z is more interested in buying gold than the age group under 40.
"The pure gold jewelry has become the safest refuge for Chinese consumers amidst uncertain economic conditions," the report stated.
Also read: Young people are stuck living from month to month
Tang Gang (28) from Guizhou Province, China, bought his fiancé a set of gold trio, consisting of a gold ring, bracelet, and necklace, as a wedding gift following Chinese customs. He did not buy a diamond ring.
The reason is simple, the price of gold continues to rise. A set of gold trio is generally priced at more than 30,000 yuan or around IDR 67 million. "Indeed it is expensive, but its value can increase in the long run compared to diamonds," said Tang to Xinhua news agency.
Luxury bag
Not only has demand for gold surged in China, but also for exclusive handbags made by Hermès. The popular French handbag manufacturer, Birkin and Kelly, reported a sales increase of up to 17 percent in the first quarter on Thursday (April 25, 2024).
The high demand for leather products from Hermès contradicts concerns regarding a decrease in interest in luxury goods. Growth in the first quarter exceeded expectations and far outperformed its rival, LVMH. Sales increased to $4.08 billion USD from January to March 31st, 2024.
Also read: Luxury Vanishes as Discounts Hit Expensive Bags
Hermès is selling handbags for more than 10,000 US dollars or approximately 162 million Indonesian Rupiah. Hermès reported a 14 percent growth in sales in Asia, excluding Japan. Executive Vice President of Finance at Hermès, Eric du Halgouet, stated that sales in China have quieted down slightly after the Lunar New Year holiday.
The high level of sales is due to strong demand from wealthier clients. "Our wealthier clients continue to come to the store," said Halgouet.
An employee holds a $129,000 US dollar Hermes bag made of crocodile leather, which is equivalent to Rp 2 billion, to be shown to the media during the opening of a new Hermes store on Wall Street, New York, USA on June 21, 2007.
Channel News Asia, on April 26, 2024, identified Hermès as one of the companies with the most reliable performance in the luxury goods sector. Its clientele primarily consists of the upper class, and the demand for its products surpasses the supply, helping the company overcome any decline.
Also read: Luxury Bags Sell Well, Hermes Employees Get Bonuses of IDR 1.4 Trillion
Although its competitors were hit hard at the end of 2022 due to the strict zero-Covid-19 containment policy in China, Hermès' business did not experience any decline.
The luxury goods industry as a whole has slowed down over the past year following the unprecedented pandemic outbreak. The consultancy firm Bain predicts that the private luxury goods market will grow by 1-4 percent in 2024, down from the estimated 8 to 10 percent in 2023.
However, Hermès is expected to be at the forefront despite more challenging prospects. The company's divisions including leather products, ready-made clothing, jewelry, and household appliances all grew by double digits. Only the watch sales division was below expectations. (REUTERS/AFP)
