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Investors load up on Chinese gold stocks, as bullion futures touch new highs on worst-ever US economic data

  • Stocks rally as gold futures rise to their highest level since September 2012 in New York and a record high in Shanghai
  • Record slump in US retail sales and factory production and inflation-inducing policies are brightening precious metal’s outlook

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A worker stacks 12.5 kilogram gold bullion bars at the Valcambi SA precious metal refinery in Lugano, Switzerland. Gold's haven qualities are shining through the market amid unprecedented monetary policy easing and rising trade tension. Photo: Bloomberg
Zhang Shidong
Chifeng Jilong Gold Mining, Zijin Mining and other Chinese gold producers surged in Hong Kong and mainland China on Monday after investors chased bullion futures in New York to their highest level in more than seven years, as grim US economic data for April stoked haven demand.
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Chifeng Gold surged by the 10 per cent daily limit to 10.27 yuan in Shanghai, its highest close since July 2016. An index tracking mainland China-listed gold producers jumped 4.7 per cent, outpacing a 0.2 per cent gain in the benchmark Shanghai Composite Index, while bullion futures approached a record high set in August 2011.

Zijin Mining Group, which derives about 70 per cent of its revenues from gold production and processing, advanced 4.9 per cent to HK$3.40 in Hong Kong for the stock’s biggest gain in almost five weeks. Zhaojin Mining Industry rallied 7.5 per cent to HK$10.10, while the Hang Seng Index gained 0.6 per cent.

The yellow metal has flourished on the tailwind of weak US economic data as the coronavirus pandemic ravaged the global economy from China to the US and Europe, drawing comparisons to the slump during the Great Depression in the 1930s.
Data published by the US on Friday only entrenched those views, as April retail sales plunged by a record 16.4 per cent, while factory production tumbled by the most going back to 1948. The Federal Reserve, which unveiled an unprecedented bond-buying support, has warned the recovery process may run through the end of 2021 and asset prices including stocks may take a significant pounding.

The reports and downbeat comments helped drive gold futures in New York to their highest level since September 2012, and recently traded 0.7 per cent higher at US$1,769.20 an ounce. Bullion futures rallied 2.7 per cent to a record 401.16 yuan per gram in Shanghai.

“Gold will probably rise above US$1,800 an ounce,” said Wang Hongwei, an analyst at Shenwan Hongyuan Group, who does not rule out the possibility of further Fed policy easing. “Chances are low that the global economy will have a V-shape rebound and central banks around the world are expected to maintain loose policies.”

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