Shares of the gold mining company fall 5% to close at S$1.15

 

[SINGAPORE] Shares of gold mining company   CNMC Goldmine   : 5TP -4.96% fell on Wednesday (Oct 22) after the yellow metal recorded a steep plunge as its rally cooled.    

 

Gold has been hitting record levels successively this year, propelling the meteoric rise of CNMC Goldmine shares, which were up by nearly 400 per cent in the year to date as at Tuesday.

 

At 11.18 am, the counter was at S$1.04, down by 14 per cent or S$0.17 from Tuesday&rsquo s closing price of S$1.21, with 10.8 million shares having changed hands. 

 

It later pared its losses and finished the day at S$1.15, lower by 5 per cent or S$0.06. With close to 23 million shares transacted, it was one of the Singapore Exchange&rsquo s (SGX) most heavily traded stocks by volume. 

 

This followed the sharp plunge in gold prices as the metal faces a correction, amid sell-offs by profit-taking investors who fear that its recent rally has left it overvalued. 

 

Spot gold prices plunged 6.3 per cent on Tuesday (US time), their steepest fall in more than a dozen years, Bloomberg said. And among SGX&rsquo s exchange-traded funds (ETFs), gold ETF SPDR Gold Shares was the top decliner on Wednesday, tumbling 4.4 per cent or 17.49 points.

 

Charu Chanana, chief investment strategist at Saxo Bank, noted that miners such as CNMC Goldmine tend to be harder hit by corrections. This is because &ldquo their earnings are more leveraged to metal prices and costs, but quality names tend to rebound (the) fastest once prices stabilise&rdquo , she said.

 

She believes that miners may face further declines before reaching a base if sentiment continues to weaken. However, the rout may present an opportunity to buy the dip if gold prices hold above key support levels, she added. 

 

Gold retreat

Gold&rsquo s pullback comes after it soared to record highs over the past week, driven by expectations of the US Federal Reserve making outsized rate cuts by end-2025, as spot gold hit the US$4,300 mark on Oct 16. An HSBC forecast on Oct 17 said that gold&rsquo s bull run would spur prices as high as US$5,000 per ounce in 2026. 

 

OCBC FX and rates strategists Frances Cheung and Christopher Wong noted that gold&rsquo s sharp rout was in line with cautionary expectations of a pullback, adding that further downside could follow should daily closing prices fall beneath key support levels. 

 

Meanwhile, City Index and Forex.com analyst Fawad Razaqzada remarked that it is &ldquo too early&rdquo to tell if gold&rsquo s broader bull trend is over. He pointed out that many investors who missed out on the yellow metal&rsquo s rally could soon buy the dip, containing the sell-offs. 

 

Similarly, Carsten Menke, head of next generation research at Julius Baer, said that the sell-off should present a buying opportunity as the fundamental backdrop for gold remains &ldquo favourable&rdquo . 

 

&ldquo There is no particular reason to pinpoint for the sell-off, apart from continued profit-taking against the backdrop of a somewhat stronger US dollar,&rdquo he said. 

 

&ldquo We are still of the opinion that a short-term consolidation is much more likely than a longer-term correction. A consolidation would in fact not be unusual after such a sharp and steep rally and should be considered healthy,&rdquo he added. 

 

Lombard Odier global FX strategist Kiran Kowshik and head of investment strategy Dr Luca Bindelli concurred that gold is overbought, but noted that constrained supplies and robust demand continue to support prices. 

 

Pointing to gold&rsquo s &ldquo parabolic gains&rdquo this year and its rise of over 60 per cent, they maintained a positive outlook on the commodity and noted that falling US real interest rates, heightened geopolitical risks, and sustained central bank and ETF buying should support a continued upside in the yellow metal. 

 

&ldquo Macroeconomic and geopolitical uncertainties are likely to remain conducive to further gold demand. Lombard Odier maintains a positive outlook on the metal, and has raised its 12-month price target to US$4,600 per ounce,&rdquo they said. 

 

DBS senior rates strategist Eugene Leow noted that the overnight gold rout could be a &ldquo warning signal for assets that have run up too much too fast, even if the fundamentals are favourable&rdquo . 

 

&ldquo Note that even with the drop in price, gold is still up by 8 per cent over the past month. By the same logic, selected assets that have outperformed may also be prone to profit taking as we head into the end of the year,&rdquo he said.