Safe haven idea pushes gold shares up

Analysts say precious metal will provide a robust hedge for investors

Share prices of companies producing or selling gold have surged in the past few weeks thanks to rising demand for the metal as a safe haven for investors.

Analysts are recommending that investors hold onto their gold-related assets, from bars and coins to gold-backed exchange-traded funds (ETFs), as demand for gold as a hedge tool is expected to remain strong in the near future.

Shares of Shandong Gold Group Co, a mining concern, rose by 9 percent in the past 20 days from 35.41 yuan ($5.15; 4.84 euros; 4.11) per share to 38.71 yuan per share.

Other Shanghai-listed gold miners Zhongjin Gold Corp, Chifeng Jilong Gold Mining Co and Hunan Gold Corp rose by more than 3 percent in the past week. Gold retailers such as Beijing Kingee Culture Development Co rose by 5 percent.

According to a research note from China Galaxy Securities Co, "The robust demand for gold in 2016, particularly in the fourth quarter, helped gold to consolidate its position. Demand for gold as a tool for hedging risks is likely to remain robust in the first quarter of 2017, after a strong Q4 in 2016. Bar and coin, ETFs and gold-related companies' shares are all likely to benefit from the demand."

The last quarter of 2016 provided the buying opportunity many retail investors had been waiting for, after the precious metal's price had been subdued for most of the year. The fourth quarter was also China's strongest quarter for gold bars and coins since the second quarter in 2013, the research note said.

According to a report by the World Gold Council in 2016, "A four-year high in investment drove price gains and demand growth."

In 2016, full-year gold demand rose by 2 percent to reach a three-year high of 4,308.7 metric tons, and annual inflows into ETFs reached 531.9 tons, the second highest on record, the council said.

Investment demand was up by 70 percent in 2016, reaching its highest level since 2012. Annual ETF inflows were the strongest since 2009.

Retail investors' positive response to the price drop in October and November pushed Q4 bar and coin demand to the highest quarterly level since Q2 2013.

In China, consumer demand is estimated at 900 to 1,000 tons for 2017, according to the council.

Yang Jie, an analyst at Shanghai-based Seawonder Precious Metal Investments, said: "Uncertainties over new policies that could be introduced by the Trump administration in the US and changes in Europe and Britain after Brexit will also push up demand for gold."

From a retail perspective, increased demand for gold jewelry from December to the end of February is also likely to help boost the share prices of gold retailers.

wuyiyao@chinadaily.com.cn