Spot gold broke below the $4,500 per ounce threshold on August 29th, Beijing time. The trigger for this decline was a hawkish speech delivered by Federal Reserve Chair Kevin Warsh on August 28th at the annual economic symposium in Jackson Hole, Wyoming. Warsh stated that inflation in the United States remains too high, and the data on prices is concerning. He argued the Fed should now focus primarily on price stability, noting that the overall performance of the American economy appears to be strengthening. While inflation has significantly retreated from its peaks of a few years ago, progress over the past two years has been limited. Although this summer's inflation data came in better than expected, it does not signal that the underlying inflationary trend has clearly improved.
When the text of the speech was released, spot gold rallied to $4,631.93 per ounce at 22:00 Beijing time, setting a new daily high. However, it quickly broke out of its high-level consolidation and dropped sharply, closing the session down over 3%, with an intraday low of $4,444.80 per ounce. Analysts believe that Warsh's remarks reinforced market expectations of a sustained tight monetary policy from the Fed, putting pressure on gold prices.
On August 29th, several major domestic gold jewellery brands in China slashed their prices significantly. Laomiao Gold cut its price for gold ornaments to 1,345 yuan per gram, a daily drop of 39 yuan, while Lao Feng Xiang reduced its price to 1,348 yuan per gram, down 36 yuan for the day. Chow Sang Sang lowered its gold ornament price to 1,344 yuan per gram, a daily increase of 37 yuan, though this appears to be a typo in the original text and likely should read "down" as well, reflecting the market-wide drop.
Notably, the violent fluctuations in gold prices have triggered a major "earthquake" in the distribution channels of the gold jewellery industry, with leading brands continuing a wave of large-scale store closures. Data from various financial reports shows that Chow Tai Seng closed a total of 557 stores in the first half of 2026, with a net closure of 473 stores. Lao Feng Xiang saw a net closure of 483 stores in the same period. Yuyuan Group, which owns the Laomiao and Yayi brands, closed 476 stores net in the first half of 2026. Chow Tai Fook reported a net closure of 258 retail outlets in mainland China for the first quarter of its FY2027 (the three months ending June 30, 2026). China Gold also closed 203 stores net in the first quarter of 2026.
This is not a short-term adjustment. Throughout 2025, Chow Tai Fook closed over 900 stores, and China Gold saw a net closure of 923 stores for the full year. "This wave of closures is not a total collapse for these brands, but rather a structural shakeup of the industry's distribution network," explained Chen Hanyi, a jewellery industry expert. "Gold brands operate both directly-owned and franchised stores. Currently, their directly-owned stores are relatively stable, but franchisees are finding it hard to make a profit, or are even incurring losses. Withdrawing from these unprofitable locations is a normal market reaction."
Meanwhile, consumer demand is also cooling, with buyers shifting from "frenzied hoarding" to "rational waiting". "The recent 'rollercoaster' movements in gold prices have put off a lot of customers who were thinking of buying. Some consumers are wary, fearing a repeat of last time where they bought right before a pullback and got stuck holding the bag at a high price," lamented a staff member at a gold shop.
Just before the sharp price drop on August 29th, the gold recycling market had experienced a wave of "cashing out" driven by the earlier price surge. "As soon as the price goes up, the number of people coming into the store to sell their gold increases dramatically!" said Wang, the owner of a gold recycling shop in Gongshu District, Hangzhou. This rally was a "lifeline" for those who had been trapped at high prices. Wang mentioned that some clients had bought the dip when prices were around 900 yuan per gram, only to be stuck for months, a period of anxiety. The recent brief surge above the 1,000 yuan per gram mark finally allowed them to break even. Many clients chose to liquidate their holdings, with one person cashing out over 50,000 yuan at once, embodying the principle of "get out when you're even, take the money and run".
Looking ahead, Wang Hongying, Dean of the China (Hong Kong) Financial Derivatives Investment Research Institute, predicts that international gold prices will experience wide, volatile fluctuations in the medium term, with $4,600 per ounce as the central pivot. The upper range is expected to be around $5,000 per ounce, with the core support level on the downside at $4,200 per ounce. In his view, the current gold market is characterized by intertwined and counterbalancing bullish and bearish factors. On the bearish side, a strengthening US dollar and rising expectations of further Fed rate hikes continue to suppress the potential for a price rebound. On the bullish side, the US debt has surpassed $40 trillion, and continued gold purchases by central banks, led by the People's Bank of China, along with the steady expansion of gold ETFs, are building a solid floor under prices.
Given the current volatile market, Wang Hongying advises investors to avoid blindly chasing rallies or selling into dips. Instead, they should trade based on range-bound strategies: when prices fall back to the key support level of $4,200 per ounce, it is suitable to establish medium- and long-term long positions. When prices surge into the high range of $4,900 to $5,000 per ounce, investors can consider implementing technical short positions at opportune moments.
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