The once-booming market for high-end traditional-style gold jewelry is showing clear signs of cooling off. A recent visit to several upscale gold stores in Beijing's core shopping districts, including SKP and China World Trade Center, revealed a stark contrast to the long queues and bustling crowds of the past. Most high-end traditional gold brand stores now see sparse customer traffic, with consumers becoming far more cautious about making purchases.
This shift comes amid a sustained decline in international gold prices. The traditional gold sector, which expanded rapidly over the past two years riding the wave of rising gold prices, is now confronting a downturn in demand. Brands such as Lao Pu Huang Jin (Old Shop Gold), which previously positioned themselves as high-end luxury items independent of raw gold prices, are finding that their customer flow and sales remain tightly tied to gold price trends. This has created a pricing dilemma: maintaining a high-premium system risks losing customers, while lowering prices in line with raw material costs could erode the high-end brand image built up over years.
Industry analysis suggests the current gold price correction is a market test of the true premium-pricing power of these high-end brands. Coupled with intensified competition and bearish outlooks on gold from international institutions, the industry is entering a critical phase of cyclical adjustment.
Consumer Enthusiasm for Traditional Gold Wanes
During the visit, many high-end traditional gold stores in Beijing's prime shopping areas were quiet, with few customers browsing. Observations at stores like Lao Pu Huang Jin and Jun Pei over ten-minute periods revealed only a handful of customers entering, mostly to look at designs or try items on briefly. The scenes of crowded shopping and checkout lines from before were absent, with no on-the-spot purchases observed.
A regular shopper in the area noted that over the past year, it was common to see long queues outside these stores, with waits of over ten minutes on weekends. "It's noticeably quieter recently. I rarely see queues anymore when I pass by," they said.
A young couple trying on traditional gold rings mentioned they came to inquire about promotions, hoping to buy while gold prices were low. However, they found that the drop in raw gold prices hadn't led to lower jewelry prices. When high craft premiums were added, the per-gram cost remained far above their expectations. "We thought it would be cheaper with gold prices down, but the final price isn't much different from the peak. We'll wait and see a bit longer," they said, deciding to postpone their purchase.
Ordinary gold jewelry is typically priced as "weight × daily market price + basic workmanship fee," with workmanship fees often around tens of yuan per gram. In contrast, high-end traditional gold brands charge craft premiums that can reach hundreds of yuan per gram. For some fixed-price collector's items, the craft premium can even exceed 50% of the total product price.
For most consumers, the fundamental logic of buying gold jewelry remains anchored in its "value preservation" attribute. Their willingness to accept high craft premiums is closely tied to expectations of rising gold prices.
"When gold prices were rising fast, people were eager to buy, many for its value-preserving nature. They didn't mind higher workmanship fees because rising gold prices would cover it. Now that the market has cooled, no matter how exquisite the craftsmanship, when you sell it back, it's only settled at the market gold price. The premium portion can't be realized," explained Mr. Li, a consumer with years of gold-buying experience. He noted that during a gold price downturn, consumers calculate costs and value preservation potential more carefully, directly reducing the appeal of high-premium products.
Commenting on this phenomenon, a finance professor pointed out a consumer cognitive bias: equating "brand premium" with "asset value," mistakenly believing high-premium traditional gold can fully preserve value, when in reality, buyback is only based on raw gold prices. During a gold price decline, this "pseudo-investment" illusion shatters, leading consumers to quickly return to rationality, stripping jewelry of its financial attributes and retaining only decorative needs. This could not only trigger a collapse in demand for high-end products but also force the industry toward a structural shift from "mixing investment and consumption" to "completely separating value preservation from adornment."
The Luxury Path Faces Pressure
Furthermore, the attempt by high-end traditional gold brands to pursue a luxury path independent of gold prices is facing a reality check.
The founder of Lao Pu Huang Jin has previously stated that high-end brands create cultural, craft, and aesthetic premiums, building their premium system on product strength, brand power, channel power, and customer service, with the goal of breaking free from raw gold price constraints. The brand has also noted that its consumer base highly overlaps with that of international luxury brands, validating its high-end positioning. However, market performance shows its customer traffic and sales remain highly correlated with gold price movements, not truly detached from the raw material cycle.
An industry insider analyzed that for traditional gold brands positioning themselves as high-end, they are currently caught in a difficult squeeze from both sides. If they directly follow the market gold price and significantly lower retail prices, it would be admitting their brand value is tied to raw material prices, eroding the high-end brand image built over years and potentially angering previous high-price customers, damaging long-term brand value. However, if they maintain the existing high-premium pricing system unchanged during a period of falling gold prices and strong consumer wait-and-see sentiment, they will directly lose price-sensitive customers, leading to continuously lower store traffic and conversion rates.
"The explosive growth of traditional gold over the past two years was essentially a dividend from the release of concentrated value preservation demand during a gold price uptrend, not a consumption upgrade driven by brand luxury attributes," the insider said. "When the tide of rising gold prices recedes, the true test is whether brand strength can really support a premium far exceeding the industry."
The finance professor similarly noted that gold's strong monetary attribute is precisely the biggest barrier to its luxury positioning. "The core of luxury is that brand premium far exceeds material cost, but gold's raw material price is transparent and constitutes too high a proportion, making it difficult for brands to build symbolic value detached from gold prices," he explained. The core difficulty lies in consumers being able to clearly deconstruct the "gold price + workmanship fee" cost structure. Once gold prices fluctuate, the high premium appears "unjustified." If brands want to pursue a pure luxury path, they must overcome the "raw material anchoring effect" and establish an irreplicable cultural narrative and craft scarcity; otherwise, they remain just "expensive metal processors."
Beyond the brands' own positioning dilemmas, uncertainty in gold price trends is further amplifying industry pressure. Recently, several international investment banks, including Goldman Sachs, have lowered their international gold price forecasts, increasing market divergence over the future direction of gold prices.
On how high-end gold brands can hedge cyclical risks, the professor suggested the core is building a "de-financialized" brand moat, which could focus on four areas: First, establish gold leasing hedges covering over 80% to mitigate inventory risk, using gold leasing instead of high-price stockpiling to optimize inventory cost structure. Second, shift from "selling gold" to "selling culture," leveraging intangible cultural heritage crafts, cultural IPs, and scenario-based design to significantly increase the proportion of non-gold value, making consumers pay for aesthetics and emotion rather than weight. Third, establish a more flexible pricing mechanism closer to market sentiment, avoiding price increases against the trend during gold price declines. Fourth, implement segmented customer group operations, directing investment-oriented clients toward standardized gold bar services and focusing high-net-worth clients on high-premium custom services.
"Gold prices have cycles, but true brand value should transcend cycles," the professor concluded. Only by proving that brand growth does not rely on a gold bull market but stems from irreplaceable cultural recognition can a brand navigate cycles and solidify long-term brand premium.
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