Global sell-off prompts slump in gold stocks

Gold stocks tumbled Monday on both the Shanghai and Shenzhen stock exchanges, amid mounting global economic uncertainties.

Shares in Shanghai Laofengxiang Co, one of China's biggest jewelers, plummeted by 9.72 percent Monday to close at 19.79 yuan ($3.16), the biggest fall among gold stocks on domestic bourses.

The rest of the precious metal sector also took a hit after a slump in gold prices in international markets Friday.

The gold futures for June delivery on COMEX, a subdivision of the New York Mercantile Exchange, fell by 4.1 percent Friday to $1,501.4. The lowest point during the day was $1,476 an ounce, the lowest price in more than two years.

The gold plunge was a result of bearish expectations that demand for gold as a safe haven from inflation will fall, Wang Ruilei, chief analyst with Chengdu-based Boyin Precious Metal Investment, told the Global Times Monday.

Some institutional investors have been selling gold futures, Wang said, which prompted more widespread sell-offs.

Signs of an improving US economy and Cyprus' plan to trade its gold reserves for bailout financing are believed to have dented the appeal of gold.

As prices fell in international markets, the price of 99.95 percent pure gold fell by 22.27 yuan per gram to close at 289.53 yuan per gram on the Shanghai Gold Exchange Monday. And the price of 99.99 percent pure gold contracted by 21.92 yuan to end at 289.9 yuan per gram.

Gold futures on the Shanghai Futures Exchange also joined the downward trend on Monday.

Some market observers believe that after 12 years of boom, the global gold market is set to cool down slightly.

Wang forecast that gold prices will drop to around $1,300 per ounce by the end of 2013. But the slide is more of a tentative correction, Wang noted, rather than the start of a prolonged slump.

Meanwhile, the gold slump has driven down prices of gold bars and jewelry, prompting a jump in sales of gold products in the domestic market.

"Over the past weekend, revenues from selling gold products soared by nearly 30 percent compared to the previous year," Jiao Guangyi, deputy general manager of Beijing Sun Gold Store, told the Global Times Monday.

The revenue surge was mainly driven by sales of gold bars for the sake of investment, according to Jiao, and there was little change in sales of gold jewelry.

The Sun Gold Store reduced prices by an average of 13 yuan per gram for gold bars and jewelry on Saturday, its biggest cut in recent years.

But Jiao noted that in previous years, after large fluctuations in gold prices, there would be sudden purchases of large and valuable gold bars. There weren't any large purchases like that last weekend, he said.

Consumers are now adopting more of a wait-and-see attitude, as some expect prices to fall further, said Jiao.