GTHT has released a research report noting that the rebound in gold prices is creating favorable conditions for jewelry and bullion-related stocks, which are expected to benefit from both sales volume and profit margin expansion.
Weaker-than-expected U.S. non-farm payroll data, combined with declining expectations for Federal Reserve rate hikes, has driven a significant surge in the spot gold price in London since August 5. The metal has now surpassed $4,300 per ounce, reaching its highest level since June 18, following a period of consolidation between $4,000 and $4,200 per ounce from late June to early August.
The report points out that the jewelry sector's stock prices have been under pressure mainly due to concerns over the gold price's decline since the second quarter of 2026, which raised worries about a high base affecting sales, gross margins, and the sustainability of growth in the second half of the year. The current gold price rebound is expected to support continued growth even against this high base, with leading companies leveraging superior product offerings to gain market share and unlock operating leverage. This is likely to drive a dual recovery in both valuations and earnings.
According to GTHT, the main beneficiaries of this gold price rally in the jewelry and bullion sector can be identified from two angles: sales volume and profit margin flexibility.
From a volume perspective, the historical relationship between gold prices and industry growth rates is cyclical, with a positive long-term correlation. Since 2024, sharp short-term price increases have shown a negative correlation with jewelry demand but a positive correlation with investment demand. Over the medium to long term, sustained gold price appreciation has a positive effect on both jewelry and investment demand. Between 2001 and 2012, the industry growth rate moved in tandem with gold prices. After 2013, the correlation weakened due to factors such as declining wedding-related demand, and since 2023, price increases have become the main driver of industry scale growth. In the jewelry segment, fixed-price gold products benefit from a relatively stable pricing system, making them advantageous during short-term gold price surges. Therefore, this gold price rally is expected to favor companies that focus on fixed-price gold products as their core offering, as well as those primarily selling gold bars.
From a profit margin perspective, the business model determines how gold price changes affect a company's gross margin flexibility. Companies with direct sales models, slower inventory turnover, a higher proportion of gram-based gold sales, and inventory valuation methods using the first-in-first-out approach are expected to see greater improvements in gross margins when gold prices rise.
Risk warnings include sharp fluctuations in gold prices, significant swings in stock and real estate markets that could crowd out gold consumption demand, poor management of franchisees, and intensified homogeneous competition within the industry.
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