(Yicai) Sept. 17 -- Chinese gold mining stocks have been falling despite London gold prices setting new record highs for several days straight. This divergence stems from mining stocks having already priced in much of gold's expected gains, while investors currently favor gold ETFs over mining shares as their preferred investment vehicle, insiders told Yicai.

The spot gold price in London rose to over USD3,700 per ounce yesterday, an all-time high, but shares of Chinese gold miners dropped today.

Zijin Mining [SHA: 601899] closed down 1 percent at CNY25.07 (USD3.52), falling for the fourth consecutive day. Shandong Gold [SHA: 600547] dropped 0.9 percent to end at CNY37.43, down nearly 10 percent from its high of CNY40.43 on Sept. 9. Chifeng Gold [SHA: 600988] gave up 3.7 percent to CNY28.5, down 7 percent from a high of CNY30.80 on Sept. 9.

Miners had already led the rally in gold and so reflected much of the recent gains, said Li Zeming, investment director at Red Ant Capital. The performance of gold mining stocks is undoubtedly correlated with gold prices, Li said, but the rhythm of their rise and fall varies. Also, most gold miners derive their revenue from non-ferrous metals such as copper in addition to gold, he added.

Li warned that if expectations of an imminent rate cut by the US Federal Reserve prove correct, then gold is expected to face correction pressure, and gold mining stocks may continue to decline.

Yu Fenghui, advisor to the Hong Kong Stock 100 Research Center, told Yicai that despite the surge in gold prices, the weakness in mining stocks is primarily due to market adjustments to future earnings expectations for these companies. There has also been short-term profit-taking, which has led to downward pressure on share prices, he said.

Looking ahead, gold prices will be influenced by multiple factors, including the global economic situation, monetary policy changes, and geopolitical risks, Yu noted. Increased uncertainty or inflationary pressures will support gold, but for mining stocks, the operating efficiency of the companies is the key consideration.

Investors have been paring their holdings in mining stocks because the market is anxious about the recent surge in gold prices, said Li Qian, an investment advisor with Huiyan Zhitou Technology 

Historically, looser liquidity after a Fed rate cut has provided medium-term support for precious metals, Li noted, adding that more conservative investors could consider gold exchange traded funds. In the medium to long term, gold prices will continue to fluctuate upward, Li said, adding that those with extensive knowledge of individual stocks will still be tempted to invest. 

Editor: Tom Litting