A sharp decline in gold prices has erased all gains made since the beginning of 2026. Investors looking to buy the dip have once again crowded gold bar counters, while the previously long queues outside Laopu Gold (06181.HK) stores have now disappeared.
On February 28, Laopu Gold announced its first price adjustment for 2026, increasing prices for many products by approximately 30%. After the hike, the per-gram price for several items reached 2,500 yuan. Through its ancient gold craftsmanship technique and a brand positioning focused exclusively on high-end shopping malls, coupled with 2-3 price increases per year and gross margins exceeding 40%, Laopu Gold has successfully positioned its gold products as luxury items. In 2025, the company reported sales of 31.375 billion yuan, a year-on-year increase of 220.3%, with net profit surging 235% to 5.03 billion yuan. The average annual sales performance per mall was nearly 1 billion yuan.
Laopu Gold's rapid growth is closely tied to the sustained surge in gold prices. Since 2023, the price of gold climbed from 400 yuan per gram to a peak of 1,250 yuan per gram in early 2026. Affluent customers at high-end malls like SKP were delighted, noting that buying gold jewelry from Laopu was not an extravagance but an investment that retained and even increased in value. However, with Laopu's recent price increase coinciding with a sharp drop in gold prices, the market is questioning whether the brand's advertised ancient craftsmanship can justify its ambitious pricing strategy.
Faced with the falling price of gold, Chow Tai Fook and other brands have suspended planned price adjustments for their fixed-price products. At Laopu Gold's 2025 annual results meeting on March 24, founder Xu Gaoming emphasized that the company has previously navigated periods of declining gold prices successfully. He stated that Laopu's market reputation, brand strength, and positioning support its premium pricing power, asserting that the company can profit even when gold prices fall.
Xu explained that the premium capability of jewelry as consumer goods depends on both its intrinsic value and its emotional value. He cited his own experience, emphasizing the importance of consistently providing high emotional value to build a mutually beneficial relationship between consumers and the brand. This emotional value is manifested in perks such as a lifetime 5% discount for Black Gold members who spend over 500,000 yuan, along with exclusive gifts, priority access to mall promotions, and complimentary reservations for private tea rooms where gold teapots are used—a service seen by some as a status symbol.
In the gold retail sector, companies commonly use hedging strategies to mitigate risks from gold price fluctuations. However, Laopu Gold, with annual sales exceeding 30 billion yuan, emphasizes that it does not engage in hedging. This confidence stems from its industry-leading gross margin, which has long remained around 40%, compared to approximately 30% for Chow Tai Fook and 20% for Chow Tai Seng. Over the past three years, Laopu has implemented 2-3 price increases annually, a routine practice underpinned by the rising gold price. However, recent price hikes of about 30% have raised concerns about consumer acceptance.
Xu Gaoming described the price adjustments as regular and planned, based on brand strength, anticipated consumer response, and the need to maintain healthy gross margins. Nevertheless, China Merchants Securities pointed out that Laopu's current revenue heavily relies on marketing tactics that capitalize on consumers' fear of missing out. Significant price increases could lead to a prolonged "demand vacuum," posing a downside risk if enthusiasm for gold wanes.
With gold prices falling rapidly in recent weeks, Laopu is beginning to face this potential demand vacuum. The extent and duration of this challenge will depend on how far and how long gold prices decline. According to financial reports, Laopu had approximately 610,000 loyal members by the end of 2025, an increase of 260,000 from the end of 2024, with about 35% of customers making repeat purchases.
Xu highlighted that Laopu's customer base includes a high proportion of premium clients—those who spend over 300,000 or 500,000 yuan to become Gold or Black Gold card members—as well as customers focused on quality and value, rather than just low price. He noted that premium clients are crucial for sustaining performance, especially during periods of broader consumer pressure. Laopu segments its products into gold jewelry, targeting items under 100,000 yuan, and gold artifacts, which represent its ambition to attract higher-spending customers. Xu claimed that in the basic product price range, Laopu has already captured a significant share of the market from international jewelry brands.
A mysterious feature known as the "Little Black Room" is often discussed among Laopu's clientele. Access requires reaching a certain spending threshold and making an appointment. The room displays various pure gold items, such as scholar's objects, mandarin duck ornaments, and replicas of the Sword of Goujian, with prices ranging from 700,000 yuan for a Ruyi scepter to 1.8 million yuan for a Yellow Wealth God statue. Some customers have shared experiences of spending millions of yuan within an hour in this room.
Amid the sharp drop in gold prices, Xu Gaoming expressed firm confidence during the earnings meeting, stating, "I am certain gold prices will not fall further this year; any decline would only be temporary." Regarding the recent price correction, HuaAn Fund noted that the sell-off was triggered by liquidity pressures and panic-driven trading. Despite short-term volatility, the fund believes the long-term macroeconomic drivers for gold—including central bank purchasing, concerns about US dollar credibility, and geopolitical tensions—remain intact. HuaAn Fund manages the largest gold ETF in China.
In a recent report dated March 26, UBS acknowledged that gold currently faces headwinds such as energy-driven inflation expectations, a stronger US dollar, and capital outflows. However, the firm views these as short-term factors and considers the price drop a correction within a longer-term upward trend. UBS maintains a target price of $5,900 per ounce for gold by early 2027.
Back in April 2025, Xu Gaoming claimed that Laopu Gold had decoupled from international gold price movements and reduced its reliance on premium derived solely from the material value of gold. By operating only in high-end malls, implementing selective staff recruitment similar to airline stewardess standards, and eliminating hard sales targets for staff, Laopu has cultivated a luxury brand image. The company cites a Frost & Sullivan survey indicating that 82.4% of its customers also shop at top international luxury brands like Louis Vuitton, Hermès, Cartier, Bulgari, and Tiffany, validating its high-end positioning.
Some Laopu customers argue that international luxury brands sell gold-alloy jewelry at prices far exceeding material value and implement regular price increases, whereas Laopu uses pure gold, offering better value retention. However, the very reasons for Laopu's appeal among affluent shoppers could become constraints during a sustained downturn in gold prices. The true test for Laopu Gold begins now, as it navigates a falling market.
Comments