Chinese gold producers tumble after bullion’s biggest drop in 12 years shatters record run

Fujian province-based Zijin Mining tumbled 1.7 per cent to HK$31.80 in the city, while Shandong Gold Mining plunged 2.6 per cent to HK$34.50 and Chifeng Jilong Gold Mining sank 3 per cent to HK$28.52. A gauge of 43 gold-linked stocks trading on the Shanghai and Shenzhen exchanges dropped 2.5 per cent, according to financial data provider Shanghai DZH. The Hang Seng Index fell 0.9 per cent.

The sell-off came after gold spot prices plunged 5.3 per cent on Tuesday, its biggest single-day drop since 2013. The run-up in the yellow metal had already exhibited signs of unwinding as investors rushed to lock in profits and looked ahead to a potential sit-down between Chinese President Xi Jinping and his US counterpart Donald Trump by the end of the month in South Korea.

“Gold’s glorious charge finally met gravity,” said Stephen Innes, a managing partner at SPI Asset Management in Bangkok. “The correction was less a betrayal than a cleansing – a necessary pause after a parabolic climb that neglected gravity.”

Before the tumble, gold had rallied 66 per cent this year, making it the best performer across major asset classes. The key driver for the blistering gain had recently shifted from geopolitical risks and expectations about US interest rate cuts to the so-called debasement trade, where investors snap up the metal to hedge against a relentless expansion of budget deficits in the world’s key economies and the credibility of the Federal Reserve’s monetary policy.

Spot gold traded 0.5 per cent lower at US$4,102.74 an ounce on Wednesday. It rose to a record high of US$4,356.30 on Monday.