As the gold price reached an historical high, the gold jewelry market in Shuibei, Shenzhen experienced a period of drastic fluctuation. May, usually a bustling month for the gold market, was filled with hope, but instead, the merchants faced a difficult situation of sluggish sales.

The Shuibei area is known for its huge agglomeration of gold and jewelry, holding half of the nation's wholesale gold jewelry market share, with annual revenues reaching hundreds of billions yuan. The main thoroughfare is lined with jewelry shops, with gold and bright red neon becoming the thematic colors of this street. Shuibei not only meets the needs of jewelers from all over the country but also has become a gold panning destination for numerous individual customers with its super low wholesale prices.

Last year, gold sales were strong, and merchants were very happy. Chen Yujia recalls that during weekends and around the Spring Festival, the sales of gold jewelry were very hot, especially the heavy gold pieces were particularly popular, and his counter could often sell out in a day. However, this spring, the rise in gold prices has greatly cooled the enthusiasm for the gold market.

Mother's Day, as one of the peaks of gold jewelry sales in the year, usually finds merchants busy stocking up, with stores brightly lit and the sound of courier deliveries constant. But this year, the gold market is unusually quiet. Xiao Sanxi, who owns a gold processing plant, remarked that this was the worst April in recent years, with shipments plummeting.

Facing the May Day holiday, merchants generally reduced their stocks and prepared more conservatively. Though there was not a small number of customers, thrifty ones mostly chose lighter gold jewelry, and sales of larger items plummeted. When the holiday was over, nearly 40% of the new gold merchandise remained unsold.

After the holiday, not only in Shuibei, Shenzhen but many gold shops across the country felt the bleakness of sales. Many merchants' complaints appeared on social platforms, customers were deterred by the prices, and some branded gold stores even ended business early. Chen Yujia walked into the gold shop with a somber look, where sitting were people including gold shop distributors, live stream sellers of gold ornaments, and those who rented counters in malls. Talking about recent business, every face was worried.

Dongdong of Shuibei Market owns a shelf that is 1.8 meters long to display gold jewelry. In the jewelry industry, the turnover speed of gold is usually used to measure business success, and under normal circumstances, the jewelry processed by factories often sells out on the day it hits the shelves. Retailers, who wholesale the jewelry, can also achieve two to three turnovers of goods in a month.

However, for Dongdong, some necklaces have been on display for three to four months, far exceeding the normal sales cycle. When gold sales in the market slowed, she turned to wholesale agate bracelets and arranged a large display on top of the counters to attract customers' attention.

In the afternoon before Mother's Day, she sold more than a dozen bracelets, but received very few inquiries for gold. Meanwhile, the girl selling gold jewelry at the island counter opposite her shop found customer flow sparse and nodded off, self-deprecatingly asking, "Is gold backing up to pick me up?"

The sharp decline felt by the merchants is mostly due to the past year’s exceptionally booming business, where "the basement level was so crowded with people that it was difficult to push through to sell a single item," recounts Ah Cheng, a 20-year-old gold store Associate.

A personal shopper, originally dealing in cosmetics in Huaqiangbei, unintentionally posted a picture of gold jewelry on social media last year, which sparked enthusiastic reactions and a flood of orders. This boom attracted a large number of associates and personal shoppers who would select styles at the gold counters for shops and consumers and earn their living through delivery fees.

Observing the purchasers at the Shuibei gold jewelry market, these individuals noted a diverse crowd, mostly composed of women. There were young people who traveled long distances with suitcases, and even groups of senior citizens.

Miss Ya, a frequent customer at Shuibei and interested in gold investment, shares that initially she thought gold jewelry was quite old-fashioned, but her opinion changed when preparing for marriage. The stability of gold, its value retention, and liquidity turned it into her primary investment in the past two years. Miss Ya aims to save at least 50 grams of gold annually. She has an excel sheet that details all her gold purchases, such as brand, date, price, and weight.

In her life, gold has become part of the everyday. Aside from birthday gold bars exchanged with her husband, her daughter's birthday presents and New Year’s money are also in the form of gold bars, friends get gold beans, and she even exchanged saved gold beans and unused jewelry for gold bars as a birthday present for her father.

Ms. Wu, who also loves purchasing gold, says that for a while she could not help but convert any spending decision into the price of gold: a drinking party with friends costing one or two thousand yuan was equivalent to three or four grams; online shopping expenses of a few hundred were converted to one gram; she wanted to buy a new handbag but resisted the temptation, saving money equated to tens of grams of gold.

On the internet, many refer to 2023 as the year of the “Gold Buying Awakening.” Ah Cheng was not very interested in gold before, but after working at Shuibei for a short time, he purchased a 50-gram gold necklace and a 12-gram gold ring for himself, which matched well with his black attire and looked “cool.” He exclaimed, "After wearing this gold necklace, I sold several of the same style."

The merchants at Shuibei recall the situation of the year before last, when gold sales were in peak season for nearly the entire year, jokingly saying, "Wasting a minute might mean one less order."

Faced with the significant increase in market demand, industry insider Ah Cheng revealed that during the busy times, he realized the workload was immense, leading him to recruit his mother to the company as the financial manager, with a monthly salary of five thousand yuan.

Specific to the Shuibei market, trends are usually communicated with various gold shops through associates. Ah Cheng remembers that during peak business periods, many gold shops didn’t even need to select hot-selling styles, "any product could sell without obstruction." He recalls one visit to several large wholesale showrooms in Shuibei, witnessing shelves almost emptied of jewelry, like an intense battle for gold. This was particularly evident around the Spring Festival, a traditional peak season for gold sales.

Acheng's uncle runs a gold shop in Hebei. Although the shop is small, it has about 20 kilograms of inventory. Acheng found that on some weekends last year, the daily sales volume reached 1 kilogram, and during the Spring Festival period, it could reach five to six kilograms a day, which is nearly a whopping sales volume of three million yuan.

According to data released by the World Gold Council, in 2023, the market size of gold products in China is about 518 billion yuan, with an annual growth of 26%. Among them, the consumption amount of gold jewelry reached 282 billion yuan, setting a new historical record. The sharp rise in demand has also prompted some factories in the Shuibei area to change their production and marketing strategies.

The Xiaosanxi factory, which used to produce on order, now must maintain sufficient inventory to meet the immediate market demand. They have up to 70 kilograms of gold reserves in the factory's inventory, and the work team has increased from less than 10 people to 25 people. In addition to wholesale in the industry, Xiaosanxi has received many so-called "big customers" in the past two years. They buy gold for a variety of reasons.

Last year, rumors of "the imminent Third World War" led to customers accumulating tens of kilograms of gold, even when the gold price of 480 yuan/gram was high. Although the gold price has recently experienced a small correction, Xiaosanxi encountered a customer who plans to invest 6 million yuan to buy gold bars in one go. Initially suspected to be a money launderer, because telecom fraud cases occur from time to time in Shuibei, it was later learned that the customer had won 10 million in the lottery and chose to convert the prize money into gold to avoid borrowing requests from relatives and friends.

Since March of this year, the international gold market has experienced a significant level of volatility. At the end of March, the price of gold began to soar, with a rise of more than 16% over the remainder of the month, followed by a sharp decline. On April 22, the price of gold plummeted by 3%, the largest single-day drop in nearly two years. After continuing to fall for three consecutive days, it sparked heated discussions inside and outside the industry, and Xiaosanxi's live broadcast room was filled with the excited voices of the audience, all asking, "Is gold going to have a major correction?"

However, this fluctuation in the price of gold has not led to a significant increase in sales and repurchase volumes. Instead, the wait-and-see attitude of consumers has reduced their willingness to buy. Merchants fixed on selling gold began to feel anxious. One merchant said that every time he walked down the street in Shuibei at the end of March, he would hear that "the price of gold has risen again," which made his scalp tingle. In the past two months, the customer traffic in Shuibei has noticeably decreased, and Lin Sheng said that the current small fluctuations in gold prices are enough to affect daily business; his sales volume suddenly dropped to a quarter of the same period last year.

A stable gold price can not only ensure a stable client base but also reduce unnecessary disputes and conflicts during the sales process.

In the field of jewelry, the retail price of Shuibei jewelry gold closely follows the fluctuations of the gold market. As the price of gold can see significant fluctuations within a day, some merchants adjust their prices several times within the day. If customers buy gold jewelry in the morning and find that the gold price has changed by evening, they may ask for a refund of the difference. This volatility in the market has led some merchants to even hesitate to quote real-time prices in live broadcasts for fear that it would cause goods in transit to be returned.

Despite the changes in passenger flow and the short-term fluctuations in gold prices not seeming to directly affect most participants in the gold industry, for merchants operating over the counter, they often deal with gold materials instead of cash for wholesale transactions. Merchants like Lin Sheng, who focus on the hard gold retail market, primarily sell small-weight gold transfer beads. For such light-weighted products, restocking in real time is not realistic, which is why they often choose to purchase a large amount of gold materials when the price of gold is relatively low.

The tireless and diligent working style of Lin Sheng and his wife means they rarely rest before midnight, as they have to constantly monitor fluctuations in gold prices to make timely restocking decisions to minimize financial risks from price volatility. During holidays, the Shuibei gold market is even more bustling with noise.

Once, on a day in April when gold prices plummeted, Lin Sheng had to face a tense and thrilling game, akin to a digital heartbeat: the price of gold dipped to 563 yuan per gram, and he quickly made a purchase through his phone. Then it was 561 yuan, followed by 551 yuan, as he continued buying gold materials. They dared not purchase too much, as each restocking meant a financial outlay of fifty to a hundred thousand yuan.

There are often rumors about jewelry stores shutting down and fleeing in the Shuibei gold market. For example, on April 16th, a store named "Million Jewelry" was suddenly surrounded by customers after a netizen exposed on social media that the store had closed abruptly, involving a vast amount of gold materials and funds. Even though the store's general manager later denied "speculative trading" rumors in media interviews, attributing it to the spread of rumors and panic, the collapse of jewelry stores in Shuibei market is not uncommon, and most are related to the so-called "speculating market" behavior.

The raw materials for domestic gold ornaments mainly come from the Shanghai Gold Exchange, and for those jewelers who cannot buy materials directly from the exchange, they usually need to go through middlemen to obtain the required gold plates. During this process, some small and medium-sized material traders opt to maximize profits by utilizing fluctuations in gold prices, meaning they might charge a higher deposit when they anticipate a price drop, delay delivery, and wait to buy gold at a lower price from the exchange.

Retailers at the end of the supply chain also sometimes voluntarily engage in this "betting" activity. A typical example is when a merchant orders one kilogram of gold from a material trader, the two parties might agree on "non-fixed pricing", meaning the entire sum is not settled when the order is placed, and the merchant also pays an additional 10% security deposit. Then, they agree on a future date for settlement; if the gold price has fallen by then, the material trader will return the gold equivalent to the price difference; conversely, if the gold price has increased, the purchaser has to make up the difference in funds.

In the gold market, a speculative behavior known as "betting" involves essentially a form of credit transaction, where buying and selling happen without the physical gold, hence it becomes relatively easy. This kind of transaction tempts many people to participate as it often makes money faster than traditional enterprises. However, such speculation is not without risk, and when the market undergoes severe fluctuations, those material traders who are unable to fulfill their contracts often abscond with the funds.

A person from the industry, once involved in speculative betting, shared his personal experience. Between 2018 and 2022, he bet three times that the price of gold would fall, resulting in a cumulative loss of over 3 million. This painful experience deterred him from taking such risks again and he uses his story as a case to persuade others to quit gambling online.

Ah Cheng, a merchandise distributor at a gold shop in the Shuibei jewelry market, has heard many similar stories. He knows of a dealer who made a profit of 500,000 in just three days, but there are countless stories of losses as well. A saying circulates here: "Buy right and get rich, buy wrong and jump off the building." On the days when the gold price fluctuates like a roller coaster, he and the merchants around him joke with each other to be extra careful when stepping outside to avoid being "hit by the gold price."

Although the sales of gold jewelry have declined, gold jewelry remains the most popular item in the Shuibei jewelry market. During weekends and holidays, crowds of people surround the busy gold counters, while the jade and jadeware counters on the same floor are deserted. Looking back on the past few years, since the outbreak of COVID-19, "hoarding gold" has become a trend, with gold prices rising by more than 60% in these four years, while the gold industry's business has not been as booming as expected.

Experts point out that the rise in gold prices is often driven by people's risk aversion. In recent years, the uncertainties brought by the pandemic and the fluctuation of the RMB exchange rate have further stimulated consumers' desire to purchase. However, gold investment is not without risks. Reports from the beginning of this year about gold shop shutdowns indicate that many consumers were unable to retrieve their gold bars deposited with these merchants, with amounts involved totaling several hundred million.

Ms. Yan, involved in this issue, said that the gold bars worth 4 million she owned were also affected. This was the money she had left over after selling her house. In 2020, in an effort to combat inflation, she bought about 12 kilograms of gold and deposited it in a special counter at a gold shop. The shop staff lured her with a 6% interest rate to choose their custodial service. Consumers are usually unaware that legitimate gold asset custody services should be handled by banks and other financial institutions, and ordinary gold shops, especially the aforementioned franchises, do not have the qualifications to operate such services. Consequently, two years later, when Ms. Yan planned to redeem her gold, she found that the shop could not honor the redemption due to financial issues, and the promised interest was no longer a topic of discussion.

After hitting a bottleneck in the gold sales market, businesses have fallen into confusion. The merchants of Shuibei have varying guesses as to the reasons for the decline in the gold business: some say it's due to a decrease in the number of recent marriages, reducing the need for wedding rings, some complain that the high gold price limits customers' spending power, while many believe the market competition is too fierce.

In the turbulent years of soaring gold prices, the gold market in Shenzhen’s Shuibei expanded rapidly. The ground floors of the originally five major malls were renovated into a unified space to welcome each and every walk-in customer, and new gold sales venues sprouted up in the surrounding area like bamboo shoots after a rainstorm. In this unpredictable market, Dongdong, who has been selling gold for five years, noticed that the small shops around her, like bakeries, flower shops, and fast-food stores, gradually disappeared, replaced by one gold counter after another, even occupying the corridors.

Indeed, merchants here half-jokingly talk about, "Will even the toilets eventually turn into counters selling gold?" However, everyone understands that just as the price of gold fluctuates, no one can predict the market's future accurately, even the mall operators are seizing opportunities, trying to gain as much benefit as possible.

The rapid expansion of the market has brought fierce competition. When Dongdong first arrived, she found a counter that only cost 1,000 yuan per square meter monthly rent, but now the rent has soared several times, and the transfer fee for popular counters is exorbitantly high. Every day, there are people who choose to exit because of the intense competition. Laughing Xisan, once a friend of Dongdong and the owner of a gold shop, couldn’t hold on in the end. He took his jewelry, weighing several kilograms, to the factory, ready to melt and sell it to recover cash. Though he lost some money in the business, at least he ensured the value of his inventory of gold jewelry.

In the mall, some counters are already unoccupied. Recalling how Shuibei market was once booming due to the "low premium" of gold ornaments, merchants had intended to make money by relying on small profit margins but high volume. However, such bustle has become a thing of the past, now both profits and sales volume have decreased.

Despite the volatile situation, the counter's owner, Chen Yujia, still has full confidence in the gold market. Before he switched to being a gold merchant, he was mainly involved in diamonds, calling that the worst year of his life. Due to sharp fluctuations in price per carat and a drop in sales, the selling price of each diamond he imported from India plummeted from over thirty-thousand to twenty-thousand. That loss made him sigh, "To recover this loss, I need to sell one kilogram of gold." Although he still has many diamonds unsold, he believes the gold business will not be worse than diamonds.

Regardless, the price of gold continues to climb. For those early market entrants, even without trading, their gold inventory is bringing them profits. Dongdong always opens the market charts in the quiet of the late night, waiting for that moment—when the gold price rises to an appropriate point, she plans to sell her gold, take the profit, and leave the industry.