Chinese gold stocks set to shine as UBS and Schroders see bullion extending gains
UBS sees gold possibly hitting US$4,700, while Schroders expects central banks’ gold purchases to keep prices elevated
Zijin Mining Group and other Chinese gold producers may get another boost from a spurt in the price of the precious metal, as some investment banks and asset managers believe the record-breaking rally in bullion is far from over.
Gold reclaimed the US$4,100 an ounce level this week, indicating that a brutal sell-off last month that sent it plunging from a record US$4,381 may be over.
UBS Group’s global wealth management unit predicts that gold will hold onto the US$4,200 level in the next 12 months and could even hit US$4,700, should risks arise on the geopolitical and financial market fronts.
Meanwhile, UK-based asset management firm Schroders said that the price of the yellow metal would continue to be underpinned by central-bank buying and growing government debt among the world’s major economies.
“Bullion can rise further amid strong demand driven by global debt concerns, political uncertainty and the [Federal Reserve’s] policy easing,” UBS Global Wealth Management Chief Investment Office said in a report on Tuesday. “We remain bullish on gold, viewing it as an effective portfolio diversifier and hedge.”
The bullish calls may present a buying opportunity for investors in gold producers, whose stock prices are highly correlated to the movements in bullion. For example, the share price of Zijin Mining, China’s biggest gold producer, has been consolidating after rallying to an all-time high last month, with the momentum waning due to the spillover effect from the commodity market.