We remain a BUY on Philex Mining Corp (PX; Target Price: P4.00), mainly on optimism that its Silangan Mine will soon start commercial operations, as well as our bullish outlook on copper. <\/p>\n\n\n\n
However, we are a HOLD on both Apex Mining Co. (APX, Target Price: P4.10) and OceanGold Phils., Inc. (OGP, Target Price: P11.15) now that the recent gold rally has been priced in. In addition, we still have concerns about OGP\u2019s forecasted decline in production and the company\u2019s lack of concrete plans for expanding its capacity.<\/p>\n\n\n\n
Gold rally cripples physical demand in key markets<\/strong><\/p>\n\n\n\n Reuters reported that the recent rally in gold prices has dampened physical demand for the yellow metal in key markets like China and India, with some retail customers even opting to sell their holdings and book profits. Key markets in Europe like Germany and Austria are also reportedly seeing a decline in demand. <\/p>\n\n\n\n Even our own BSP said that they sold some of our gold reserves in the first half of 2024 to generate additional income, reducing its gold holdings from $10.6-Million as of year-end 2023 to as low as $9.9-Million in June before gradually increasing it back to $10.2-Million as of end-August. Gold as a percent of total GIR dropped from 10.2% in December 2023 to 9.5% in August 2024.<\/p>\n\n\n\n Rally is turning speculative<\/strong><\/p>\n\n\n\n The price of gold has climbed by 28.8% yeer-to-date (YTD), and ended just slightly below $2,660\/oz on Wednesday. This rally seems to now be fueled mostly by demand from ETFs and hedge funds, as well as American investors following the Fed jumbo rate cut in September. <\/p>\n\n\n\n Online retailed Gold Avenue reported a 66% increase in purchases since the Fed cut rates, although the company also saw a 13% increase in customers selling back their gold since then. Adrian Ash, head of research at online marketplace BullionVault commented that gold prices defies logic by \u201csetting fresh record highs even though visible demand has either collapsed or gone negative across pretty much all segments.”<\/p>\n\n\n\n Tide could be turning for gold<\/strong><\/p>\n\n\n\n Given the shift in supply-demand dynamics, we expect that gold\u2019s rally could be capped around this level. The price of the yellow metal could remain elevated in the near to medium term as gold continues to attract investors looking for a place to stash their cash as bond yields drop, but upside will likely be very limited without physical demand underpinning prices and downside risk is steadily increasing.<\/p>\n\n\n\n