Stepping out of the pricing shadow: Chinese brands combating gold price fluctuations

After last week’s biggest one-week drop in gold in 43 years, the decline continued after open on Monday this week, with gold prices falling below the $4,300 level. On the same day, Laopujin released its 2025 full-year performance report.

Image source: Visual China

The financial report shows that in 2025, the company’s revenue was RMB 27.3B, up 221%; net profit was RMB 4.87B, up 230.5%. However, due to fluctuations in gold prices, during the reporting period, the international gold price rose by nearly 55%; the company’s full-year gross margin was 37.6%, down from previous levels. Laopujin said that after three price increases during the year, its gross margin has recovered to above 40%.

The doubling of revenue and net profit did not immediately reflect in the stock price. On March 23, Laopujin’s share price fell 8.59%, hitting a one-year low.

According to a report released by Ping An International last year, Laopujin’s share price has a very high correlation with gold prices, with a correlation coefficient R of 0.94. At the time, the firm’s judgment was that global macroeconomic conditions have a high degree of uncertainty, and that gold prices are expected to maintain an upward trend in the long term, supporting the market performance of Laopujin.

In the following nearly one year, as geopolitical conflicts escalated, oil prices rose, rate-hike expectations strengthened, and an increasingly complex international environment impacted global liquidity, gold prices saw large-scale volatility. And this “correlation between share price and gold price” still held—on the day after the financial report was released, as gold prices rebounded, the good performance of Laopujin finally appeared in its stock price. On March 24, its share price surged by more than 16%.

The correlation between share price and gold prices, to a certain extent, suggests that the product value is still tied to gold’s financial attributes. During periods when gold prices rise, this creates an upward channel for Laopujin at the intersection of the concepts of gold and luxury goods. In an environment where it is difficult to do well in luxury retail, gold’s advantage as a store-of-value asset allowed Laopujin to capture a batch of consumers. Data shows that Laopujin’s core consumers overlap, on average, by more than 77% with consumers of the world’s top five luxury brands.

But this kind of correlation also indicates that Laopujin still falls short of becoming a truly meaningful luxury brand. Although it has long adopted a “one-price” model (not priced per gram) and has gone through multiple price increases, when consumers buy, they still instinctively assess the current value of its gold raw materials. By contrast, when facing products from brands like Hermès, consumers rarely calculate what the value of its raw materials is at present.

Even so, Laopujin’s counter-trend performance has already attracted attention from international luxury giants.

When LVMH Group CEO Bernard Arnault visited China last year, he specifically toured Laopujin stores; Gucci’s parent company, Kering Group, invested in Boran, which operates in the same segment as Laopujin—also following a luxury-goods logic for running a gold brand, with strategies directly benchmarking Laopujin.

Rather than saying Laopujin’s business model has been recognized by international giants, it is more accurate to say it is trying to become one of the giants. According to statistics from Fortes Barry Sullivan, based on the revenue ranking of luxury groups in China’s mainland market in 2025, Laopujin has surpassed Hermès to take the second spot, only behind LVMH.

But for Chinese brands that aspire to become “luxury” brands, a reality they must face is that today’s genuinely top international luxury brands have almost all undergone more than a century of long tests and successfully weathered multiple economic cycles.

The gold-price volatility taking place now is the most intense “stress test” that Laopujin—founded a little over a decade ago and having established its luxury route only a few years ago—has experienced.

The brand’s most recent price increase was about a month ago. The single-product price increase ranged from 20% to 30%, marking the sixth price increase in the past two years and also one of the larger ones. At that time, gold prices had not yet shown a downtrend, and even before the adjustment, there was a rush to buy in the lead-up to the price change.

If gold prices drop significantly and show no improvement in the short term, and gold prices continue to stay below the market’s psychological line, whether consumers will still be willing to pay a premium remains to be seen. This also brings opportunities—only when gold’s “financial attributes” and “market sentiment” are shaken, and the financial “luxury goods” exterior of Laopujin products that supports value retention and appreciation is washed away, can its “luxury logic” be validated.

The company’s founder and chairman, Xu Gaoming, showed sufficient confidence in this. On March 24, at an annual performance briefing, gold-price fluctuations were a problem he would inevitably have to address.

Xu Gaoming said that Laopujin has never been optimistic about a sustained rise in long-term gold prices. The company emphasizes that whether gold prices rise or fall, it has the ability to maintain good market performance. He believes Laopujin is not only able to profit from periods when gold prices rise; in a downturn stage, Laopujin will also maintain market sales performance through its four premium capabilities—product strength, brand strength, channel strength, and customer service strength.

To meet this goal, Laopujin has previously clearly stated that it does not use hedging instruments—including leasing and futures—to offset the risk of gold-price fluctuations, but instead manages costs and price-risk by combining a monthly procurement plan with dynamic adjustments to the “one-price” model. This is radically different from the operating model of traditional gold brands.

In essence, it is betting that the brand premium can outweigh the impact of fluctuations in product raw material prices, betting that product pricing can be decoupled from gold prices. Xu Gaoming believes that doing hedging is equivalent to giving up a brand strategy.

While maintaining the brand’s tone and identity, this model also enables Laopujin to reap rich inventory appreciation dividends during gold-price upcycles. The corresponding risk, however, is inventory impairment during downcycles, along with a decline in product gross margin. And considering the cycle from procurement to sales, this model sets high requirements for the company’s sales stability; otherwise, the company’s cash flow will face pressure.

Worth noting is that Xu Gaoming holds a positive view on the near-term outlook for gold prices. At the performance briefing, he said that gold will not keep falling this year, and even if there are adjustments in stages, the company has the capability to respond.

For Laopujin, besides surviving through cycles, there is one key step that needs to be completed for it to become a truly “luxury” brand—going global, so that brand value earns recognition across the world.

Xu Gaoming said that this year it is taking a conservative approach to expanding new stores in mainland China, mainly focusing on optimizing existing stores, while it will be more proactive in expanding overseas stores. Currently, Laopujin is in discussions in countries and regions such as Hong Kong, Singapore, Malaysia, and Japan.

These regions have a deeper base of recognition for gold and jewelry, making it relatively easier as a first step in going global. To become a luxury brand, however, “breaking into the mainstream” is a necessary path—turning the brand into a widely recognized symbol worldwide. In this regard, this brand has just taken its first step.

This step has already been seen. In Citibank and Nomura’s latest research reports, Laopujin is positioned as a rare target asset that is moving toward “China’s first truly luxury brand.” It needs more time to prove that the brand can continue to survive across different markets, eras, and economic environments, and maintain its ability to command a premium. (Fortune Chinese website)

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