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Chinese gold mining stocks have been declining even as gold prices in London hit new record highs for multiple days. This discrepancy arises because mining stocks have already factored in much of gold’s anticipated gains, and investors are currently favoring gold ETFs over mining shares as their preferred investment option, insiders revealed.
Yesterday, the spot gold price in London surged past $3,700 per ounce, reaching an all-time high, yet shares of Chinese gold miners experienced a decline today.
Zijin Mining closed down 1% at CNY25.07 (about $3.52), marking its fourth consecutive day of declines. Shandong Gold fell 0.9% to CNY37.43, nearly 10% below its September 9 peak of CNY40.43. Chifeng Gold dropped 3.7% to CNY28.5, which is 7% lower than its high of CNY30.80 on September 9.
According to Li Zeming, an investment director at Red Ant Capital, miners had already driven the recent rally in gold prices, which means they have already priced in much of the upward movement. While gold prices strongly influence mining stock performance, their movements often don’t align perfectly. Additionally, many gold miners generate revenue from other non-ferrous metals, such as copper.
Li cautioned that if signs of an imminent rate cut by the Federal Reserve are accurate, gold might face correction pressures, and mining stocks could continue their downward trend.
Yu Fenghui, an advisor to the Hong Kong Stock 100 Research Center, explained to insiders that despite the rising gold prices, the weakness in mining stocks mainly reflects market adjustments to expected future earnings and short-term profit-taking, which has dampened share prices.
Looking forward, gold prices are expected to be affected by a range of factors, including the global economic environment, monetary policy shifts, and geopolitical tensions. Heightened uncertainty or inflationary concerns are likely to support gold, but for mining stocks, operational efficiency remains the most critical factor.
Market participants have been reducing their holdings in mining stocks amid worries about the rapid increase in gold prices, stated Li Qian, an investment advisor at Huiyan Zhitou Technology.
Historically, easier liquidity following a Federal Reserve rate cut has provided medium-term support for precious metals. Li suggested that more cautious investors might consider gold ETFs. Over the medium to long term, gold prices are likely to continue fluctuating upward. Investors with deep knowledge of individual stocks may still find opportunities worth exploring.
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