J.P. Morgan raised its target price for Zijin Mining (02899) to HK$4.9 from HK$4.1 but downgraded its rating to "neutral" from "overweight" on historically high valuations.
The research house said Zijin H/A shares have risen by 30% year-to-date, driven by the strong gold price rally. JPM believes the high valuation is risky given its view that the current gold price cycle may have peaked.
While near-term light positioning and surging momentum could carry gold higher to US$2,000/oz, JPM does not believe it will be supported by fundamentals. It believes the key gold price driver, the real 10-year US treasury yield, will drift higher, capping the
upside for gold. It expects gold to average US$1,880/oz in 4Q versus the current spot price of US$1,956/oz.
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