The price of gold surges, why does the performance and stock price of Shandong Gold Mining (01787) in Q3 deviate from each other?

On October 15th, international gold reached another historical high, attracting widespread attention. By 10 am, COMEX gold broke through the $4200 per ounce mark, reaching a high of $4205.8 per ounce; London spot gold also broke through the $4180 mark, reaching a high of $4186.8 per ounce. However, in stark contrast, Shandong Gold Mining (01787, 600547.SH), a gold concept stock, experienced a sharp decline after the positive earnings announcement. On the 15th, amidst the rising gold prices, Shandong Gold Mining's A-shares took a significant downturn, dropping more than 7% in the morning session, then narrowing the decline slightly. By the end of trading, its stock price had fallen by 3.35% to HK$38.68; at the same time, its A-share price also saw a sharp decline in the morning session, dropping over 6% at one point, and closing down 2.77% at 41.7 yuan. This presented a stark contrast to the hot market environment where gold was hitting historical highs. Of particular note, on October 14th, Shandong Gold Mining officially disclosed a positive earnings forecast. According to the forecast, Shandong Gold Mining expects a net profit attributable to the parent company owner of 38.0 billion to 41.0 billion yuan for the first three quarters, an increase of 83.9% to 98.5% year-on-year. The company attributed the growth in earnings to optimizing production layout, enhancing technological innovation, improving management efficiency, and the significant increase in profit due to the rise in gold prices. Given the positive earnings growth and the surge in international gold prices, why did Shandong Gold Mining's stock prices fall? Slowing growth rate vs. capacity expansion potential of multiple construction projects It can be observed that the decline in Shandong Gold Mining's stock price after the positive earnings report is the result of a combination of "internal quality doubts about good news" and a "stronger external negative market environment". From the internal perspective, there is a significant slowdown in the growth rate, leading to market disappointment after meeting expectations. Although the company's net profit for the first three quarters increased by 83.9% - 98.5% year-on-year, the net profit in the third quarter showed a significant slowdown compared to the second quarter. Furthermore, before the announcement, Shandong Gold Mining's A-shares had risen for three consecutive days (limit up on October 9th, up 5.7% on October 13th), with a cumulative increase of over 15%, and the market had already anticipated the growth in earnings. After opening on October 15th, some funds chose to take profits, causing the stock price to open high and then drop. This phenomenon of "good news leading to bad market performance" is quite common. From an external environment perspective, the dampening of risk aversion sentiment and sector rotation have led to a downturn in the gold sector as a whole. Despite the ongoing Israeli-Palestinian conflict, market concerns about its spillover effects have diminished. The attractiveness of gold as a safe-haven asset has decreased, with funds more inclined to chase high-dividend or growth stocks. However, it should be noted that despite the slowdown in Shandong Gold Mining's earnings growth rate, the company has shown a sustained upward trend in business performance over the past year or two due to increasing gold prices. In the first half of 2025, the company achieved operating income of 56.766 billion yuan, a year-on-year increase of 24.01%; net profit attributable to the parent company was 2.808 billion yuan, a year-on-year increase of 102.98%; and net profit attributable to the parent company after deducting non-recurring gains and losses was 2.810 billion yuan, a year-on-year increase of 98.74%. On a quarterly basis, in Q2 of 2025, the company achieved revenue of RMB 30.83 billion, a year-on-year increase of 14.97%, a quarter-on-quarter increase of 18.87%, net profit attributable to the parent was RMB 1.782 billion, a year-on-year increase of 160.53%, and a quarter-on-quarter increase of 73.68%. Both earnings and revenue saw significant growth year-on-year and quarter-on-quarter. From a project perspective, Shandong Gold Mining's key projects are progressing smoothly and are expected to help the company achieve its long-term production goals, thereby supporting continuous growth in business performance. In the first half of 2025, the construction of the deputy shaft project at Sanshan Island gold mine reached a depth of -1900 meters, setting a new domestic deep shaft record. Additionally, the construction of the 15,000 tons/day expansion project for ore selection has been approved and various procedures such as installation review are in progress to ensure that the project is fully ready for construction. At the Jiaojia gold mine resource integration project, 4 of the 5 main vertical shafts have successfully reached the bottom and work is underway on supporting excavation, drainage and power distribution, as well as construction of transport tunnels to ensure construction progress is being fully supported. Furthermore, progress in overseas projects continues, with the Catino Company's Namutoni gold mine project advancing efficiently, production system testing and production capacity ramp-up are ongoing, and overall production is stable and improving. The acquisition of the Osino company project in Namibia by Shanjin International Gold in 2024 is progressing efficiently, with the plant construction plan set to begin in the fourth quarter of this year and production expected in the first half of 2027. In conclusion, the decline in Shandong Gold Mining's stock price after the positive earnings announcement is the result of multiple factors resonating: in the short term, profit decline, market sentiment reversal, and technical adjustments are leading the stock price trend; in the long term, capacity expansion (such as the Catino project) and cost optimization (such as self-operational transformation) still hold potential. International gold price breaking the $4000 mark, is the top in sight? As a major factor affecting the performance of gold concept stocks, the international gold price breaking the $4000 mark is clearly worth exploring. On October 8, 2025, the international gold price witnessed a historical moment. The COMEX gold futures price broke through the $4000 per ounce mark in intraday trading, reaching a high of $4081 per ounce; the London spot gold price also climbed, reaching a high of $4059.31 per ounce. From the core driving factors, the breaking of the $4000 mark in the international gold price is mainly due to three factors. Firstly, amidst factors such as the ongoing US federal government shutdown and escalating geopolitical tensions, there has been a rapid increase in short-term risk aversion sentiment. The ongoing US federal government shutdown has created uncertainty about economic prospects, leading to an influx of safe-haven funds into gold. At the same time, the tumultuous situation in the Middle East and other factors have significantly increased the appeal of gold as a safe-haven asset. At this moment, concerns about political and systemic risks have heightened, with the "fear and greed index" showing a stable declining trend, nearing the 50-point level and gradually approaching the "fear" range. Secondly, the continued strengthening of expectations for a rate cut by the Federal Reserve. According to data from CME's Fed Watch tool, the probability of another 25 basis point rate cut at the October 29 meeting remains high at 95%. The low interest rate environment reduces the opportunity cost of holding gold, boosting the gold price. Additionally, the persistent expectations of a rate cut have led to a steady decline in the 10-year US Treasury bond yield, currently hovering around the 4% mark. Gold, as a safe-haven asset and a natural alternative to bonds, is benefiting from the decline in yields. Thirdly, there is a structural inflow of funds. Central bank gold purchases have been steady: according to data from the World Gold Council, global central bank net purchases of gold reached 415 tons in the first half of 2025 (a 21% decrease year-on-year, but still significantly higher than the five-year average); on the other hand, investment demand has surged: official data from SPDR, the world's largest gold ETF, shows that holdings in SPDR increased to 1014.58 tons on October 8, reaching a historic high. Private investors have poured a large amount of money into gold ETFs, becoming another catalyst for the current rise in gold prices. However, just one day later on October 9th, the international gold price experienced a "dive", with the spot gold price dropping below the $4000 per ounce mark and New York gold futures falling by over 1.9%. This rapid decline after hitting a historic high has sparked widespread attention to the future trend of gold prices. Now, it becomes crucial to ask whether the breaking of the $4000 mark in the international gold price marks a peak? Upon this, Caida Futures believes that both technically and fundamentally, it is currently not possible to conclude that the gold price has reached a historical peak; the likelihood of a continuance of the upward trend is higher. From the fundamental perspective of gold, the Israeli-Palestinian conflict is only a regional conflict, while geopolitical tensions, including the Russia-Ukraine conflict, and the disruptive policies of the Trump administration continuing to affect the global landscape, lead to increased uncertainty, with central banks reducing their holdings of US dollars and increasing their holdings of gold as international reserves. The Fed still has ample room to cut interest rates further, and the above factors continue to support gold and silver prices. Guoxin Securities, meanwhile, points out that the pullback in gold prices after breaking the $4000 mark is a normal reaction to excessive short-term gains, better-than-expected US economic data, and a marginal easing of geopolitical risks. The logic supporting the long-term rise in gold prices has not changed, with factors such as a slowdown in global economic growth and risks of debt crises continuing to provide support for gold prices. The pullback can be seen as a buying opportunity, rather than a signal of a market turning bearish. In the short term, the pullback presents an opportunity for positioning, with support at $3950 (international), while also keeping an eye on the strength of the US dollar and the upcoming Fed interest rate meeting; in the medium to long term, maintaining a gold allocation, with preferred investment targets being gold ETFs, physical gold, and gold mining stocks such as Zijin Mining (H/A shares), Shandong Gold Mining (H/A shares), where significant leverage effects can be seen. In conclusion, Shandong Gold Mining, as a leading company in the gold industry with solid fundamentals and clear strategies, the short-term decline in stock prices does not affect the company's long-term growth potential. For long-term investors, Shandong Gold Mining is a high-quality target to benefit from the dividends of the gold bull market, with its outstanding resource reserves, production scale, and international presence providing strong support for its long-term value.