This Small-Cap Jeweler Trades Below Its Cash and Gold Value, Benefiting from Rising Gold Prices

Gold has come back into vogue, with prices increasing by 15% year-to-date and reaching a record high of $2,432 per ounce.

In China, gold is highly valued as a precious commodity. It is often given as a gift during special occasions such as weddings, symbolizing the high regard in which the recipient is held. Additionally, many Chinese view gold as a reliable store of value and an attractive investment prospect.

Gold is considered a Veblen Good, meaning that higher prices actually boost demand instead of diminishing it. As the price of gold hits record highs and captures more attention, the demand for gold bars and jewelry intensifies. There is also a prevailing fear that delaying purchases could lead to even higher prices in the future.

This surge in gold prices is beneficial for jewelers, who are experiencing not only increased demand but also the ability to sell their jewelry at higher prices in line with the rising cost of gold.

Some of the major and well-known jewelry retailers in China, such as Chow Tai Fook (SEHK:1929) and Luk Fook (SEHK:590), are expected to reap the benefits of this trend. However, they are not the most undervalued in the market. Our analysis has identified a deep value jeweler that is trading below the value of its cash and gold inventories.