Gold miners have struck it lucky so far this year. With equities and non-gold commodities tanking amid slow global trade and raw materials oversupply, investors have traded risky assets for defensive options, sending the gold price soaring.
Sentiment on Chinese gold related stocks improved considerably when trading resumed after the Lunar New Year, driven by the gold price rally, though they retreated slightly this week when gold weakened after some analysts questioned if the rally could continue.
In Shanghai, Shandong Gold Mining shares soared 32 per cent this month to hit a six-month high of 23.39 yuan (HK$27.94) on Tuesday before dropping to 22.63 yuan at the Wednesday morning close.
In Hong Kong, Zijin Mining is up 27 per cent this month to close at HK$2.19 on Wednesday morning, after hitting a eight-month high of HK$2.36 last Friday. Zhaojin Mining Industry rose 21.65 per cent this month to close at HK$5.16 on Wednesday morning, after hitting a two-month high of HK$5.38 last Friday.
China Gold International Resources rose 14.58 per cent this month to HK$12.26 on Wednesday morning and G-Resources Group picked up 22 per cent this month to close at HK$0.22 on Wednesday morning.
Their strong performance came as spot gold rallied, hitting a one-year high of US$1,263.48 per ounce on February 11, up 18 per cent for the year. That was a record 44 times the price of oil, according to Deutsche Bank. Bullion brokers GoldCore declared a bull market, and Nomura analysts said US$1,300 was on the cards.
However, the rally retreated this week after the stock market bounced back – minimising the appeal of gold as the traditional safe bet amid a slumping market.
Goldman Sachs released a report on Tuesday saying last week’s rally wasn’t justified. After that, gold dropped 1.5 per cent to US$1,191.02 an ounce on Tuesday before bouncing back to US$1,207.95 at noon Wednesday in Hong Kong. Even with the retreat this week, gold is still up 13 per cent this year and has risen about 7 per cent this month alone.
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