Gold breakout rally sends Chinese bullion stocks near highs as central banks keep buying

A rebound in gold prices has pushed shares of Chinese producers of the precious metal near record highs, while the bullion’s status as a strategic investment remains intact amid global central bank buying and financial stress in the world’s key economies.

Shares of Zijin Mining Group and Chifeng Jilong Gold Mining Group, the nation’s biggest metal producers, have risen at least 40 per cent from July lows in Shanghai, approaching all-time highs set earlier this year. A gauge of mainland-listed gold stocks has gained about 25 per cent from the low, according to data provider Shanghai DZH.

The reversal of the downtrend in gold stocks followed a similar pattern of bullion prices, which have risen 12 per cent over the past month in New York after tumultuous sell-offs triggered by the oil shock.

This month, gold broke out of its 50-day moving average, a key technical level, bolstering the argument that months of turmoil in the metal market may have run their course. China and Poland led central-bank buying in the second quarter, partially countering the sell-offs from exchange-traded funds (ETFs) and speculative positions.

“Gold still earns its place as a strategic holding,” said Gary Dugan, CEO of The Global CIO Office, which advises family offices and high-net-worth individuals for investments.

Gold rose 1.3 per cent to US$4,479 an ounce on Tuesday, extending gains spurred by receding fears of an immediate interest-rate hike after a weaker-than-expected reading in US jobs data.

The metal has risen by 3.3 per cent this year. Still, it is 18 per cent off the January 28 peak of US$5,447 an ounce, as elevated oil prices fuelled speculation that the US Federal Reserve would tighten monetary policy, reducing the appeal of the non-yielding asset.