Gold prices plunge continuously, Shenzhen Shuibei regains popularity, investors seize the opportunity to buy the dip! Merchants: Some customers bought 2 kilograms at once!

On March 23, domestic gold prices fell below 1,000 yuan per gram. By the close of trading in the afternoon, the Shanghai Gold futures contract dropped 8.62%, closing at 940 yuan per gram. International gold prices also declined, with spot gold falling a total of 10.52 last week, marking the largest weekly drop since March 1983.

Despite the sharp decline in gold prices, a lively scene was unfolding at the Shui Bei Gold Jewelry Counter in Shenzhen, contrary to the market trend.

On the morning of March 23, a reporter from Daily Economic News visited the Shenzhen Shui Bei gold market and found that the jewelry counters were bustling with customers, with some merchants conducting live sales simultaneously. Overall foot traffic had significantly rebounded from previous levels. One customer told the reporter, “Gold prices have dropped just in time to buy ‘hardware’ (gold bars), and if they fall a bit more, the cost of buying jewelry will be even lower.”

A gold jewelry supplier told the reporter that recently, many investors have been buying gold, but based on recent oil prices, they estimate there is still some room for gold prices to fall.

Increased Foot Traffic in Gold Jewelry Area

Recently, international gold prices have fallen sharply for four consecutive trading days, with domestic gold prices following suit. The reporter noted that today, the Shanghai Gold futures price dropped by 8.62%, equivalent to a decrease of 88.66 yuan per gram compared to the opening price.

The decline in gold prices has also affected consumer sentiment. On March 23, the reporter visited Shui Bei in Shenzhen. Despite it being a Monday, the jewelry counters saw a steady flow of customers, noticeably more than when gold was at the high point of 1,200 yuan. Some customers were asking the staff about the future trend of gold prices, worried about buying at a high.

The reporter observed that traditional jewelry such as gold bangles, necklaces, and rings remain popular, with craft products like 5G gold and ancient-style gold also favored. Some merchants said, “Now, many customers are coming to exchange gold. If they have gold bars, they can just pay the difference to exchange for jewelry.”

Another merchant suggested that for small-weight jewelry, fluctuations in gold prices are less of a concern, but for products over 50 grams or 100 grams, a comprehensive consideration is necessary.

Gold Prices Have Fully Recovered All Gains This Year
Some High-Position Investors Are Replenishing Positions to Lower Costs

Since the beginning of the year, international spot gold has risen by nearly 30% at its peak, but with recent price declines, all gains have been wiped out. Unlike consumers buying jewelry, investors are more hesitant.

Some investors said they had taken profits at high prices earlier and are now considering re-entering physical gold. Others are starting to buy the dip, with one customer purchasing 2 kilograms of gold in a single transaction. A merchant told the reporter, “The gold price has come down these days, and more people are jumping in. Some are buying 2 kilograms at once.”

A business that mainly recycles gold bars also revealed that many clients who entered at high prices are lowering their average cost through additional purchases. “For example, clients who bought at over 1,200 yuan now buy more gold to reduce their average cost. If they have enough funds, they’re not in a hurry to sell,” the merchant said. They also noted that some clients with a cost basis around 300 yuan are choosing to cash out now.

Regarding the volatile market, some investors admitted to feeling conflicted: “No one knows where the bottom is. I’m afraid to buy in the middle, but I also don’t want to miss out. Plus, I don’t have much capital left.”

Regarding the recent decline in gold prices, Yuan Zheng, a precious metals researcher at Galaxy Futures, told the reporter that the main reasons are twofold: first, the Middle East situation has driven up oil prices, triggering expectations of interest rate hikes, and the US dollar index, especially in Japan and Europe, is more affected by crude oil shocks, creating a strong dollar demand for oil resources, which strengthens the dollar and suppresses precious metals; second, speculative long positions in precious metals were extremely crowded earlier, and liquidity shortages have caused panic selling and a market stampede.

Has the Safe-Haven Logic Changed?
Industry: More Due to Short-Term Trading Strategy Shifts

Despite ongoing turmoil in international affairs, traditional safe-haven assets like gold have not risen but fallen.

Yuan Zheng explained that the long-term upward logic of gold has shifted from its traditional “hedge” function to a deeper “monetary credit restructuring,” mainly reflected in three aspects:

1. De-dollarization and central bank gold purchases: This is the strongest medium- to long-term support. As geopolitical risks normalize, non-US central banks (especially emerging markets) continue to increase gold holdings to avoid sanctions and enhance financial security. Although recent gold buying has slowed, this strategic trend is far from over.

2. Weakening US dollar credit: The US fiscal deficit remains high, and combined with the weakening of the technological support in the “three pillars” of the dollar, the dollar’s credit system is eroding. Gold, as an asset not constrained by a single sovereign credit, is being revalued.

3. Stagflation hedging and systemic risk: Under the potential risks of “high inflation and low growth,” gold’s anti-inflation properties will be fully utilized. Additionally, gold serves as a hedge against the collapse of the international order and sovereign credit risks.

“Although recent gold prices have experienced a significant correction, overall, the long-term upward logic has not changed markedly. The decline is more due to a shift in short-term trading strategies, and the long-term fundamentals are temporarily suppressed,” Yuan Zheng said.

Huafu Securities analyst Zhou Puhan stated that the current strength in oil prices and rising inflation expectations are transmitted to liquidity and risk appetite. During this period of conflict, US dollars and cash may better meet safe-haven needs. Moreover, this week, market expectations for Fed rate cuts have weakened, with US February PPI rising more than expected, and Fed Chair Powell adopting a hawkish stance, even hinting at rate hikes. Changes in real interest rate expectations and tightening liquidity environment have put heavy pressure on gold.

“After liquidity shocks, the long-term support for gold still exists. On one hand, central bank gold purchases provide solid support for prices. On the other hand, if the war continues to drain resources, it will increase US military spending and fiscal burdens, depleting US dollar credit and promoting de-dollarization,” Zhou Puhan said.

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before acting. Use at your own risk.

Reporter: Zhao Jingzhi

Editor: Chen Kemin, Chen Junjie, Du Hengfeng

Proofreader: Cheng Peng

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