Gold Mining Stocks Plunge Again, Creating New Recent Adjustment Lows | Market Watch

Tensions in the Middle East remain high, drawing renewed attention to gold prices and gold mining stocks. Recently, gold mining stocks have significantly underperformed gold itself.

According to industry insiders interviewed by First Financial, the weakness in gold mining stocks is due to factors beyond company operations. The tense Middle East situation has caused oil prices to surge, triggering inflation, which makes central banks like the Federal Reserve more cautious about cutting interest rates. This is bearish for gold, and short-term adjustments are expected. However, there may be opportunities to position in the second quarter, as central banks continue to buy gold and other fundamental factors supporting a medium- to long-term upward trend remain.

On March 16, London spot gold briefly fell below $5,000 per ounce, while gold mining stocks continued to decline sharply. Zijin Mining (601899.SH) fell more than 6% intraday, Zijin Gold International (02259.HK) dropped over 7%, hitting recent lows. Leading stocks such as Shandong Gold (600547.SH), Chifeng Gold (600988.SH), and Zhaojin Mining (01818.HK) also saw significant declines.

At midday, Zijin Mining closed down 4.67% at 34.1 yuan, touching 33.6 yuan during the session, representing a cumulative correction of over 25% from the high at the end of January.

Although gold prices still hover around $5,000 per ounce, most gold mining stocks have hit new lows and fallen below their February lows. Since peaking at the end of January, these leading stocks have experienced a correction of about 25% to 30% over the past month and a half amid volatile declines. On February 2, gold approached $4,400 per ounce.

Cen Zhiyong, an analyst at Wutong Research Institute, told First Financial that gold mining stocks are affected not only by gold price fluctuations but also by company operations, debt issues, and market sentiment. These factors all influence stock prices. Additionally, recent oil price increases have driven inflation higher, making it difficult for the Federal Reserve to cut rates further, or even prompting rate hikes, which is also unfavorable for gold.

Guotai Securities international strategist Wu Lixian told First Financial that the sharp decline in gold prices was the main driver behind the drop in gold mining stocks. Market concerns about rising crude oil prices potentially fueling global inflation could impact the U.S. rate cut decisions later this year. Currently, the market expects at most one rate cut in the second half of the year, or possibly no cuts at all, putting short-term pressure on gold prices. In the medium term, international gold prices may see a “bottoming out followed by a rise” pattern in the second quarter, supported by ongoing uncertainties in the global economy and central banks continuing to increase gold holdings.

Yu Fenghui, an advisor at the Hong Kong Stock 100 Research Center, stated that despite gold prices remaining high, the recent sharp correction in gold mining stocks mainly reflects market concerns over rising costs, policy risks, and global economic recovery uncertainties. Investors have lowered their earnings expectations for these companies. Additionally, as inflation expectations heat up globally, markets worry that central banks may adopt tightening monetary policies, which also pressures gold mining stocks. From a medium- to long-term perspective, considering geopolitical risks and excessive money supply, gold’s status as a safe-haven asset remains unshaken.