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Gold approaches record high amid SVB, Credit Suisse turbulence, war in Ukraine, setting off stellar run on China’s biggest gold producers, bullion stocks

  • China’s top three gold producers by market capitalisation have outperformed onshore stocks this year as funds pile back into the metal amid increasing demand for haven assets
  • Bullion has a chance to challenge its all-time high price, Saxo Markets says in research note

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Gold producers are among the few sectors that could prove resilient this year, analysts say. Photo: Bloomberg
Zhang Shidongin Shanghai
A spectacular run on Chinese gold producers has legs, as demand for hedges against financial turmoil and persistent geopolitical risks underpins a rally in bullion that is only about 5 per cent short of its all-time high, analysts said.

Zijin Mining Group, China’s biggest gold producer by market capitalisation, has been trading close to its highest level since April 2022 in Shanghai after a 17 per cent gain this year. Zhongjin Gold, the second largest, has advanced 21 per cent in the same time span, which has also taken it to its highest level in almost two years, while Shandong Gold Mining, the third largest, has risen 11 per cent. They all beat a 3.3 per cent gain by the CSI 300 Index of China’s onshore stocks.

Gold producers are among the few sectors that could prove resilient this year, as tumult from the banking sector in the United States and Europe roils financial markets globally and Russia’s invasion of Ukraine drags on. The outperformance is supported by a more than 7 per cent gain in bullion futures trading in New York this year, with funds piling back into the metal amid increasing demand for haven assets.
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“Demand for gold is still there,” said Wang Qi, an analyst at Guosheng Securities. “Geopolitical risks and panic sentiment both put a floor under such demand. Gold stocks are expected to be in for a bull run based on expectations about the uptrend in gold prices.”

02:30

Thousands of jobs at risk after UBS’ US$3.2 billion takeover of Credit Suisse

Thousands of jobs at risk after UBS’ US$3.2 billion takeover of Credit Suisse
Expectations of a slower pace of interest rate rises by the US Federal Reserve after the collapse of Silicon Valley Bank and the crisis at Credit Suisse, coupled with the protracted war in Ukraine, and an escalating confrontation between China and the US, will continue to add momentum to gold, the brokerage said.
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Gold futures slid 2.1 per cent to US$1,941 an ounce on Tuesday for their biggest drop since February, after UBS Group took over Credit Suisse in a government-led acquisition and the US said that it would protect all bank deposits. The metal closed at a record high of US$2,051.50 on August 6, 2020.
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