Goldbugs scour Chinese stock markets for trades leveraged on surging metal prices as lure of SOEs, economic reopening dulls
- Gold prices hover at all-time highs amid US banking crisis fears and global central banks stockpiling at a frenetic pace
- Stocks of gold producers Shandong Gold, Zhongjin Gold and Zijin Mining are up by around 10 per cent in 2023, beating the CSI 300 Index’s 1.7 per cent gain
A sizzling rally in gold has triggered a wave of buying in Chinese stocks seen benefiting from near record prices of the precious metal, with analysts saying investment themes such as state-owned enterprises (SOEs) and economic reopening have run their course.
Gold producers such as Zhongjin Gold and jewellery retailers like Lao Feng Xiang and Chow Tai Seng Jewellery are currently being recommended by brokerages Citic Securities and Haitong Securities, amid sustained bullion demand.
The precious metal, a customary safe haven against inflation and economic uncertainty, has been on a roll this year as expectations grew the US Federal Reserve could pause its interest rate raising campaign, while elevated funding costs, uncertainty around the debt ceiling and the US banking sector woes dampen the economic outlook. Demand for non-yielding gold tends to weaken when higher interest rates boost returns on other yield-producing assets.
Earlier this month, spot gold rose to this year’s highest level of US$2,050.28 an ounce, within striking distance of the all-time peak of US$2,063.54 struck on August 6, 2020.
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“Risk-averse sentiment is expected to build up again to further drive gold prices amid the banking woes in the US,” said Bai Junfei, an analyst at Citic Securities in Beijing. “Furthermore, the end of the interest-rate increases by the Fed is already approaching and there are odds about cuts within the year. That makes a good opportunity for allocations to the gold sector.”
ANZ research analysts expect further gains for gold on the back of central banks’ buying and a pick up in demand for physical gold, provided India, one of the biggest buyers in the world, has a good monsoon season. They expect gold prices to hit US$2,100 by the year-end.
