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Experts cautious over gold prices despite recent rally

Gold has recently come back to the spotlight amid global political uncertainty, but experts at the 121 Mining Investment Hong Kong conference are still cautious over the outlook for gold prices.

Samson Li, a senior metals analyst at Refinitiv GFMS, said during a March 20 panel discussion that Chinese demand for gold remains unclear. The analyst noted the start of risk-off sentiment in late 2018, which he said was related to investors lacking confidence due to a downturn in the Chinese economy.

"They just saw it as a secure asset to invest in instead of seeking growth ... and the Chinese government is still cautious over the capital outflow, which made gold a good choice for investors as it is easy to buy."

Li believes that Chinese demand for gold can at best return to the same level as last year due to poor consumer sentiment, which is traditionally dominated by the country's jewelry sector.

The analyst said gold prices will also depend on whether China can eventually reach an agreement with the U.S. to end the trade war, while also noting that Brexit could result in a huge surge in gold prices.

CEF Holdings Chairman and CEO Warren Gilman said he still finds it is hard to see volatility in the long term when investing in gold, although his view towards gold has changed in the last six months due to a softer U.S. dollar.

"I have stayed away from the gold market in the last three or four years. But the Fed has changed its tune completely in the last six months, which is a huge change for the environment of gold," he said. "My view has become much more positive. But it's still hard to get excited about the gold price when you are not seeing any movement."

Refinitiv's Li also said he expects some M&A opportunities for Chinese mining companies this year as some are showing eagerness to see what comes out of the recently completed US$18.3 billion acquisition of Randgold by Barrick as well as the pending US$10 billion merger between Newmont and Goldcorp. Barrick and Newmont also recently agreed to form a gold joint venture in Nevada.

In a same-day presentation, George Fang, executive director and senior executive vice president of Zijin Mining Group Co. Ltd., said the company is open to gold opportunities to increase its asset portfolio.

Fang said one of Zijin's strategies in 2019 is to forge communications with the gold industry to seek collaboration with international companies. It will also work on the construction of its current projects and exploration in the surrounding areas, Fang added.

In the next three years, Zijin aims to double its production of mined gold, copper and zinc, as well as its net profit.