Gold producers shoot up after bullion surges to 3-month high

PUBLISHED : Tuesday, 02 June, 2009, 12:00am
UPDATED : Tuesday, 02 June, 2009, 12:00am

Shares of Hong Kong-listed gold producers jumped more than 10 per cent yesterday as bullion prices climbed to the highest in more than three months earlier in the session and investors pumped more money into the stock market.

The biggest gainer was Fujian-based Zijin Mining Group, which closed 13.55 per cent higher at HK$7.96.

Zhaojin Mining Industry, a gold producer in Shandong province, surged 11.47 per cent to finish at HK$14, while Henan province's Lingbao Gold climbed 10.79 per cent to close at HK$3.49.

Real Gold Mining, a gold firm in Inner Mongolia, saw its shares surge 10.12 per cent to finish at HK$7.51.

Gold, however, slipped later yesterday in Europe, erasing earlier gains, as the US dollar pared losses against the euro and rose against the Japanese yen in the wake of US economic data, Reuters reported.

Spot gold was bid at US$976.40 an ounce at late in London against US$978.20 at the close in New York on Friday, off a high of US$988.50.

US gold futures for this month on the the New York Mercantile Exchange eased US$2.10 to US$976.70.

Prices of other precious metals including silver and platinum continued their advance yesterday.

'Gold producers' profit will definitely increase with the surge in gold prices,' said Heng Kun, who expects that bullion will rise to an average of US$950 an ounce this year from US$878 last year.

The recent gain in gold prices has been helped by expectations of further dollar depreciation and inflation concerns, said Mr Heng. He expects gold prices to stay between US$900 and US$1,000 an ounce this year.

Traditionally, gold moves in the opposite direction of the dollar, so a weak dollar drives gold prices up.

'Gold prices are expected to remain well supported as long as the economic and financial risks prevail,' Citigroup analysts Alan Heap and Alex Tonks said in a report. They expect the average gold price to rise to US$1,000 an ounce next year.