China’s gold fever: record prices and see-saw sentiment – do consumers buy, sell or hold?

With gold prices dancing near a never-before-seen US$3,900 an ounce, Chinese investors and consumers are finding themselves caught up in a whirlwind of excitement and trepidation – frustrated by missed opportunities, wary of the record-high rally, and scrambling to decide whether to buy, sell or hold their glittering assets.

After topping US$3,800 an ounce for the first time last week in a surprise surge that has continued this week, gold is keeping market participants on their toes.

Li Yue, a Guangzhou-based engineer and an individual investor, saw what looked to be a golden opportunity to cash in on his holdings of the valuable mineral on September 19. He sold 200 grams (seven ounces) at 824.89 yuan (US$115.88) per gram, predicting that the price would correct downward. Instead, it continued to climb, reaching 873.69 yuan an ounce by the end of the month, when he spoke to the Post.

“Gold prices are soaring, and I can’t decide whether to buy or sell,” Li said. “I sold too early, and now prices keep climbing; it’s hard to know what to do next.

“It’s so frustrating that I’ve switched to investing in silver instead.”

In retail stores, shoppers are displaying a similar sense of hesitation.

Gold jewellery usually sells well before holidays, but the price rally has made consumers more cautious, said Jane Feng, a saleswoman at a jewellery store in southern China’s Guangzhou. As a result, she said, demand for bars and coins is on the decline.

The price of gold jewellery at major Chinese retailers has surpassed 1,120 yuan per gram, far exceeding the 890 yuan seen around Valentine’s Day just six months ago.

“At that time [in February], rose-shaped gold pieces weighing about a gram or two were popular among young male customers, being priced at about 1,000 yuan,” Feng said. “Now, a small 0.74-gram piece can cost about 1,200 to 1,500 yuan and seems too light to feel meaningful as a gift.”