The gold industry chain is experiencing "two extremes"! Some enterprises are using derivatives to enhance their risk resistance capabilities.

In 2024, the performance of publicly listed firms in China's gold industry chain was characterized by robust growth in the upstream sector and a decline in the downstream sector. Benefiting from the sustained and significant increase in gold prices, the performance of gold mine-related publicly listed firms in the upstream sector of the gold industry chain surged in 2024. However, as gold prices continued to rise, consumer demand for gold jewelry was impacted, leading to a general decline in the performance of publicly listed firms in the downstream gold jewelry sector.

Futures Daily reporters reviewed the annual reports of nine gold mine-related publicly listed firms and found that the performance of these firms surged across the board in 2024. Among them, Shandong Gold, the industry leader, achieved operating revenue of 82.518 billion yuan in 2024, up 39.21% YoY, and net profit attributable to shareholders of the publicly listed firm of 2.952 billion yuan, up 26.80% YoY. Chifeng Gold recorded the largest increase in net profit in 2024, up 119.46% YoY, and achieved operating revenue of 9.026 billion yuan, up 24.99% YoY. Both Western Gold and Xiaocheng Technology turned losses into profits in 2024.

The significant growth in the performance of gold mine-related publicly listed firms in 2024 was attributed to the sharp increase in gold prices on the one hand, and the increase in the firms' gold production and sales on the other hand.

Shandong Humon Smelting stated in its annual report that in 2024, the company achieved operating revenue of 75.801 billion yuan, up 15.59% from the same period last year, due to the increase in sales revenue from its main product, gold.

Shandong Gold stated in its annual report that the main reason for the increase in the company's operating revenue in 2024 was the increase in the sales volume and selling price of both self-produced and externally purchased gold in the current period.

Reporters found through reviewing annual reports that the gold production of many gold mine-related publicly listed firms increased in 2024. For example, Shandong Gold produced 46.17 mt of gold from its mines in 2024, up 4.39 mt or 10.51% YoY. Shandong Gold International achieved gold production of 8.04 mt in 2024, up 14.69% YoY. Chifeng Gold achieved gold production of 15.16 mt in 2024, up 5.60% YoY.

While upstream enterprises in the gold industry chain were quietly reaping profits, publicly listed firms in the downstream gold jewelry sector, whose main business involves gold jewelry sales, were struggling, with a significant decline in performance.

Lao Feng Xiang, a leading enterprise in the gold jewelry sector, disclosed its 2024 annual report recently, showing that the company achieved operating revenue of 56.793 billion yuan in 2024, down 20.50% YoY, and net profit attributable to shareholders of the publicly listed firm of 1.95 billion yuan, down 11.95% YoY. Lao Feng Xiang stated in its annual report that in 2024, the world economy lacked growth momentum, domestic effective demand was insufficient, and consumer spending was sluggish. Coupled with the sustained increase in gold prices, this led to weak consumption in the gold jewelry sector.

Another leading publicly listed firm in the gold jewelry sector, China National Gold Group Corporation, also experienced a decline in net profit in 2024.Data shows that China National Gold Group Corporation achieved operating revenue of 60.464 billion yuan in 2024, up 7.27% YoY. Net profit attributable to shareholders of publicly listed firms was 818 million yuan, down 15.93% YoY.

In its 2024 annual report, Chow Tai Seng, a publicly listed firm in the gold and jewelry sector, stated that during the reporting period, the uncertainty of the external economic environment increased significantly, and gold prices rose rapidly, further dampening consumers' enthusiasm for purchases and putting considerable pressure on the jewelry consumption market. In 2024, the company achieved cumulative operating revenue of 13.891 billion yuan, down 14.73% YoY. Among this, revenue from gold product sales was 7.717 billion yuan, down 24.34% YoY.

In addition to the aforementioned companies, Mingr Jewelry, Darry Ring, and other companies in the gold and jewelry industry also reported a decline in net profit YoY in 2024.

As gold prices continue to climb, significant changes have occurred in the gold industry. On the upstream smelting side, major gold mine publicly listed firms have all reported plans to increase production or expand capacity. However, in the downstream consumption sector, demand for gold jewelry has been suppressed. In Q1 2025, gold jewelry consumption decreased by 26.85% YoY, with some consumer demand shifting towards investment demand. This year, the total open interest in gold ETFs has increased significantly.

"Currently, amidst the backdrop of increasing uncertainty in the global political and economic landscape, gold demand is expected to continue to maintain a robust trend," Shandong Gold Group pointed out in its 2024 annual report. Firstly, from an economic performance perspective, the new US administration's tariff hikes on foreign countries will trigger a new round of trade frictions, causing harm to the global economy. Meanwhile, the rising debt levels in the US may undermine the credit of the US dollar. Secondly, from a monetary policy perspective, tariff hikes on foreign countries may have a certain impact on the US economy while driving inflation to rebound. Therefore, it is expected that the US Fed will still cut interest rates, but the pace may slow down. Finally, from a geopolitical risk perspective, the "America First" policies planned by the US government will exacerbate tensions between major powers, and the global geopolitical situation may become more complex. It is expected that gold's role as a store of value and its hedging value in global asset allocation will further increase, and the gold industry will face better development opportunities.

In its 2024 annual report, Western Gold pointed out that the structure of the future gold market will change. On the one hand, consumers' increasing preferences and requirements for the style, quality, and price of gold jewelry may subject the gold jewelry market to greater competitive pressure. This will prompt gold jewelry enterprises to increase product innovation and market expansion efforts to adapt to changes in market demand. On the other hand, the gold investment market will become more diversified and specialized.

Sichuan Gold stated in its annual report that due to the interplay between international geopolitical turmoil and expectations for US Fed interest rate cuts, gold's status as a safe-haven asset has gradually become prominent, and it is expected that gold prices will fluctuate upward. The company will continue to monitor domestic and overseas macroeconomic conditions and political environments, enhance its comprehensive research and judgment capabilities on gold price trends, and improve the efficiency of spot price settlement. Through measures such as in-depth promotion of refined management and comprehensive budget management, the company aims to reduce unit production costs.

Wu Zijie, a precious metals researcher at Jinrui Futures, holds a bullish view on medium and long-term gold prices. He believes that the core driving force behind the rise in gold prices is the growth in demand for physical gold, represented by continuous central bank gold purchases and ETF inflows. The underlying factors are the trend of de-dollarization, expectations for US Fed interest rate cuts, US debt issues, and geopolitical conflict risks. Although gold prices are currently at historical highs, investors can still consider gradually building positions in batches during pullbacks, adhering to the principle of "buying small amounts during minor declines and larger amounts during major declines," to avoid rushing to buy amid continuous price rise at high levels. For enterprises in related industries, they should conduct systematic hedging through financial instruments such as futures and options, establish a tiered risk management mechanism, control risk exposures in the process of raw material procurement and product sales, stabilize corporate operating profits, and avoid being impacted by sharp price fluctuations.

Gu Jianan, Assistant General Manager of Haitong Futures Research Institute, believes that gold is still in a long-term upward trend, and its current price has not yet peaked. In the short term, considering Trump's signals for trade negotiations, global market risk appetite is expected to continue to rebound, and the upward trend in gold prices will temporarily come to an end. From a long-term perspective, Trump's tariff policies will further promote "de-globalization," and the strengthening of trade barriers will drive down the demand for US dollar settlements. As a non-sovereign credit anchor, gold's monetary attributes will drive its price to continue rising.

"For investors, it is recommended to firmly adhere to the strategy of long-term gold holding and reduce speculative and leveraged operations. If there is a need to increase positions, it is advisable to wait for entry opportunities after pullbacks and avoid chasing highs. Related enterprises can utilize financial derivatives such as futures and options for hedging to lock in costs or profits. At the same time, optimize inventory management and adjust inventory levels based on market forecasts," said Gu Jianan.

It is worth mentioning that many listed gold companies disclosed their use of financial derivatives for hedging in their 2024 annual reports.

Shandong Gold stated in its 2024 annual report that during the reporting period, the company and its subsidiaries primarily conducted hedging businesses related to their main operations to ensure stable operating performance.The financial derivative contracts used by the company and its subsidiaries for hedging purposes are linked to products and foreign exchange related to the company's production and operation, thereby reducing the risk of price fluctuations, achieving the expected risk management objectives, and further enhancing the company's production and operation capabilities as well as its risk resistance.

In its 2024 annual report, Western Gold stated that to ensure stable operating performance, the company primarily engages in hedging activities related to its main business. The gains and losses on the derivatives side and the spot side can be hedged against each other, reducing the risk of price fluctuations and further enhancing the company's production and operation capabilities as well as its risk resistance. During the reporting period, the combined profits from derivative transactions and changes in spot value amounted to 34.1965 million yuan.