Core Viewpoint - The recent rumors regarding the operational issues of over ten gold material suppliers in Shenzhen's Shui Bei area have been addressed by the Shenzhen Gold and Jewelry Industry Association, which claims that 60%-70% of these suppliers are still operating normally, with only about 30% facing problems, primarily small-scale businesses [2][3][5]. Group 1: Industry Response - The Shenzhen Gold and Jewelry Industry Association has conducted on-site visits and confirmed that many of the rumored troubled businesses are still functioning normally [2][3]. - The association is collaborating with local government departments to implement measures for the standardized development of the gold material supplier industry, including market education and the creation of a warning list for high-risk businesses [3][4]. Group 2: Market Dynamics - The Shui Bei area is recognized as China's largest gold processing industry base, generating several hundred billion yuan in annual output [3][4]. - Gold material suppliers primarily operate by recycling old gold items and selling processed gold plates to retailers, profiting from the price difference between recovery and sales [4]. Group 3: Causes of Operational Issues - Some gold material suppliers have faced severe financial difficulties due to aggressive short-selling strategies in the gold market, leading to significant losses as gold prices surged from $3,400 to a peak of $3,715.2 per ounce [5][6]. - The use of high leverage in speculative trading has exacerbated the financial strain, with losses escalating as global gold prices remained near historical highs [6]. Group 4: Market Recovery - Following the association's clarification, the gold recovery business in the Shui Bei area is beginning to stabilize, with recovery merchants resuming operations after initial hesitance due to the rumors [7].

Core Viewpoint - The rising tensions in the Middle East have led to a significant increase in gold prices, with COMEX gold futures surpassing $3,400 per ounce, reflecting a rise of over $100 per ounce compared to the previous week [2] Industry Impact - The surge in gold prices is negatively impacting gold jewelry processing companies, as expectations of continued price increases are leading to reduced purchasing power from downstream gold retailers, particularly ahead of the Mid-Autumn Festival and National Day [3][5] - Many small gold processing enterprises are facing closures due to insufficient orders from retailers, leading to intense competition over processing fees [3][5] - The World Gold Council reported a 32% year-on-year decline in gold jewelry demand in Q1, totaling 125 tons, attributed to high gold prices and a reduction in retail store numbers [3] Long-term Challenges - A significant long-term challenge for the gold jewelry processing industry is the declining marriage and birth rates, which are expected to reduce the rigid demand for gold jewelry, accounting for over 30% of overall metal demand [4] - Companies are focusing on capacity reduction strategies to adapt to the changing market dynamics and consumer preferences [4][7] Operational Adjustments - To survive the downturn, companies are shifting production from heavier gold items to lighter, lower-cost products, despite lower processing fee revenues [6] - Many processing firms are abandoning self-operated procurement models to mitigate financial risks associated with rising gold prices and shrinking retailer orders [6][7] Market Dynamics - The number of gold retail stores is decreasing, with major chains like Chow Tai Fook and Chow Sang Sang closing hundreds of locations [7] - Processing companies are adapting to new procurement models that require additional logistics and management efforts, increasing operational costs [9][10] Financial Pressures - The processing fee income has dropped by over 25% due to price wars, and additional costs from logistics and order management are squeezing profit margins [11] - Companies are exploring overseas markets to offset domestic declines, but face challenges in adapting to different consumer preferences and cultural contexts [12]