(Bloomberg) — Gold’s months-long, record-breaking surge is keeping consumers at bay in China, tarnishing what should be one of the busiest times of the year for jewelry retailers in the world’s biggest buyer.

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Spot bullion prices pushed beyond $2,600 an ounce for the first time this week, after Federal Reserve Chair Jerome Powell cut interest rates by half a point and signaled the start of an easing cycle. Gold has rallied by just over a quarter so far this year.

Large investors are not yet moving away from the yellow metal, with many seeing room for further purchases. But China’s crucial retail consumption has not been immune to a bleak economic downturn and slide in confidence that has dragged down consumer brands and retail sales. Shares in Chow Tau Fook Jewellery Group Ltd. fell to a four-year low last week.

In Shuibei in the southern city of Shenzhen — a vast mall that has China’s biggest concentration of gold jewelry merchants — store owners offered little optimism on the current wedding season around the mid-autumn festival in September and the coming week-long National Day holiday in early October, which is typically seen as a litmus test for consumption.

“If business continues to be this bleak, it will become a matter of survival,” said a man surnamed Wang, who runs a counter in the Shuibei International Jewelry Trade Centre. He declined to give his full name.

Some shopkeepers said sales in late August and early September were down by at least 50% compared with a year earlier, when the the mall was full and the most popular counters saw customers jostling for space.

China’s gold premium — a measure of domestic demand — has been at negative levels for most of the past two months. Imports of the precious metal for the month of August touched their lowest point since 2021, according to data released on Friday.

Wholesale demand has also been weak, with August withdrawals from the Shanghai Gold Exchange down 37% from a year earlier, according to the World Gold Council. August and September typically see higher withdrawals as jewelers stock up ahead of gold fairs and the National Day holiday.

Wait and See

The picture is not uniformly grim. Bars and coins are continuing to attract investors seeking a store of value as traditional assets like property falter. In the first half of this year, data from the China Gold Council implied a 27% fall in jewelry purchases, but only a 6% fall in total demand.

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Still, China’s economic woes and pressures on personal income are combining to worsen the spending outlook.

“The decline in consumer demand for gold jewelry stems mainly from the weaker income expectations,” said Song Jiangzhen, a researcher at Guangdong Southern Gold Market Academy. “Elevated gold prices have also discouraged consumers, most of whom are in wait-and-see mode, hoping for prices to come down before buying.”

For some, the time has even come to sell up.

“I haven’t bought any gold jewelry in the second of half this year, though I bought a necklace during the Chinese new year as a gift for myself. Now it’s too expensive,” said a middle-age production manager at a state-owned factory in suburban Shanghai, surnamed Bao, who also declined to give her full name.

Instead, she said she would consider promotions encouraging buyers to consider cashing in existing pieces to take advantage of high prices.

“Everyone is downgrading their consumption.”

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