Uncovering China’s Top Gold Capital: The Shuibei District

Shuibei is the biggest gold capital in China, but not many understand its driving forces. In just a short 15-minute train ride, investors can travel from Hong Kong to the dazzling, gold-filled shopping malls filling the Shuibei district. Both retail buyers and investors alike travel to Shuibei to shop for precious metals at top-tier locations like Jinzuo Yinzuo, Shuibei International, and Shuibei Yihao.

More than half of China’s gold jewelry comes from Shuibei since it sits close to the free-trade port of Hong Kong, making it easy for entrepreneurs to bring innovative technology and capital into the city.

Shuibei’s first gold processing facility was established in 1981 when a businessman from Hong Kong developed the foundations for what would eventually become China’s premier gold capital. Today, you can travel to Shuibei to shop for gold from internationally recognized brands or more unique treasures from local shops. Buyers can even shop online for their favorite Shuibei gold products.

In more recent years, the demand rate for high-purity gold in Shuibei has surged beyond the typically low purchase levels. Retail buyers typically steer away from the outdated form of the precious metal as they tend to look for more economical options, but this trend shifted as buyer preferences changed with a younger market. For instance, China’s biggest digital marketplace platform, Tmall. com, experienced a 250% year-on-year increase in “Double Eleven” pre-sale gold transaction volumes this year alone.

So, why is gold demand increasing so much in Shuibei?

Buyers under 35 are driving Shuibei’s gold demand, showing that gold buyers, in general, are getting younger.

A report from 2016 on China’s gold industry showed that just 16% of Gen Z shoppers wanted to purchase gold, whereas in 2021, 59% of the young population were interested in buying the precious metal.

Additional data shows that 55% of retail gold shoppers in China range between ages 25 and 34. The second-largest age group is 35 to 44, accounting for 36% of China’s retail gold purchases.

As Shuibei’s gold-buying population gets younger, some other trends are emerging, forging the industry’s growth patterns. To start, many younger consumers prefer to buy gold online for convenience and security purposes, which bodes well for the market, as jewelers can reach wider audience groups.

With this movement to online sales, we’re seeing a unique sector of jewelry sale paths arise. Consumers are buying gold online in far more unconventional ways, like live stream videos or influencer sales links. All of these channels may direct to the same sale, but we’re essentially seeing more channels opening purchase opportunities for younger generations.

While Shuibei may appear as a bustling gold district in person, much of the sales supporting the market are going on behind the scenes.

Another key driver behind Shuibei’s increase in gold demand from younger populations is a rise in investment purchases. After the COVID-19 pandemic, Gen Z experienced economic uncertainty, which sparked investor demand for safe-haven gold from younger populations. Because of this, we’re seeing increased purchases of investment products, like coins and bars.

The post-pandemic world also created an increased cultural demand for gold. China follows a long-held wedding tradition of purchasing “three-gold” (a gold necklace, earring, and a ring) or “five-gold” (including the last three items plus a bangle and bracelet). The COVID-19 pandemic put these purchases on hold during lockdown, but now that the restrictions have been lifted, we’re seeing a significant resurgence in cultural gold purchases.

In an interview with Tan Weiyun, 29-year-old Beijing gold buyer Xiao Zhu said, “I made a special trip here to splurge nearly 100,000 yuan on gold jewelry for my wedding last month. And I’m here again because, with the recent dip in gold prices, I think it’s the perfect time to make another purchase,”

China’s gold premium reached $45 per ounce in October, which shows a decline from September’s record high and likely boosting local buyer sentiments.

Analysts suspect that China will remain a key driver in the gold industry moving into 2024, supporting international gold prices. China consistently ranks in one of the top two positions for largest gold buyers in the world, with India as its top competitor.

Recent news showed that Hong Kong has officially become Russia’s largest gold importer, displaying yet another sign of the nation’s rising gold market. As China continues importing gold at record-breaking rates to meet the rising consumer demands, the greater gold market may experience positive effects.

As always, investors should consult their financial advisors before making any portfolio decisions.

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