1. Current Market Environment: Rate Cut Expectations and Central Bank Gold Buying Drive Precious Metals Cycle Upward
In September 2026, the global precious metals market showed a volatile upward trend driven by multiple positive factors. Fed Chairman Walsh released dovish signals after the September 18 interest rate meeting, stating that "the future rate cut path will be more flexible." Coupled with the second-quarter central bank gold purchases hitting a historical high (220 tons, up 25% year-on-year), this provided strong support for gold prices. The London gold price returned to $4,300/ounce on September 20, a new high for the year, while silver prices also broke through $30/ounce due to the surge in industrial demand from the photovoltaic and AI chip industries, reaching the highest point since 2026.
For Singapore investors, the precious metals sector in the STI index (represented by ADRs of Asian mining companies listed in the US) has become a focal point. These companies not only benefit from revenue growth driven by rising gold prices but also gain market favor due to the valuation reconstruction of "inflation-hedging, high-dividend" assets under the Fed rate cut cycle. According to data from the Singapore Exchange (SGX), as of September 23, the holdings of Singapore gold ETFs (such as SPDR Gold Shares) increased by 18% from the beginning of the year, showing that local investors' demand for precious metals asset allocation is rising.
2. Divergence in Financial Reports of Asian Precious Metal Mining Companies: The Dual Game of Production and Costs
Entering the third quarter of 2026, the financial performance of major Asian precious metal mining companies showed significant divergence, with the core logic being the "production growth" vs. "cost pressure" trade-off. Taking China's Zijin Mining as an example, its second-quarter report showed gold production reached 32 tons, up 12% year-on-year, mainly due to the early commissioning of the Serbia copper-gold mine. However, the company's costs rose 8% year-on-year, mainly affected by energy prices (coal prices up 15%) and labor costs (wages in Indonesian mining areas up 10%). CICC therefore raised Zijin Mining's target price to HK$18, believing that "production growth will offset cost pressure, and there is still room for long-term valuation improvement."
In contrast, Indonesia's Antam (ANTM) performed more impressively. Its second-quarter gold production reached 18 tons, 5% above market expectations, mainly due to the commissioning of a new mine in the Sumatra mining area. Goldman Sachs upgraded its rating to "Buy" in a report on September 19, setting a target price of $15 (ADR price), citing that "Indonesian gold reserves surged by 20%, and production is expected to maintain a 15% compound annual growth rate over the next three years." In addition, the implementation of new Philippine mining regulations also brings opportunities for local mining companies: Philippine gold production is expected to grow by 15% in 2026, mainly due to the government relaxing foreign ownership limits (from 40% to 60%), attracting international capital and promoting supply chain restructuring.
However, not all mining companies can enjoy the "production growth" dividend. Some companies face production decline pressure due to aging mines or resource depletion. For example, Thai Gold's second-quarter production decreased by 7% year-on-year, mainly due to the decline in ore grade in old mining areas and the lag in new mine development. The valuations of these companies are thus suppressed, becoming "value traps" in the market.
3. Valuation Reconstruction: Valuation Logic of Mining Companies Under the Fed Rate Cut Cycle
Fed rate cut expectations are the core driver of the current valuation reconstruction of precious metal mining companies. Historically, when the Fed enters a rate cut cycle, real interest rates (nominal interest rate minus inflation rate) usually decline, reducing the opportunity cost of holding gold and thus driving up gold prices. For mining companies, rising gold prices directly increase their revenue and profits, while rate cuts lower their financing costs (such as debt interest expenses), further enhancing profit expectations.
Taking Zijin Mining as an example, its current P/E ratio is 15x, lower than the industry average of 18x, mainly due to market concerns about its cost pressure. However, as Fed rate cut expectations become clear, the market begins to re-evaluate its dual logic of "production growth + rate cut dividend." CICC's report points out that if the Fed cuts rates by 50 basis points in the fourth quarter of 2026, Zijin Mining's EPS will increase by 12%, and the corresponding P/E ratio will drop to 13x, with significant valuation repair space.
Moreover, the high-dividend attribute has also become a plus for mining company valuations. For example, Antam's dividend yield is about 4.5%, higher than the average dividend yield of the STI index (3.2%), attracting Singapore investors seeking stable returns. Zijin Mining's dividend yield is about 3.8%, slightly lower than Antam's, but it is still regarded as a "growth-oriented high-dividend" target due to its production growth potential.
4. Linkage Between STI Index and Precious Metals Sector: Singapore Investors' Layout Strategies
As the core index of the Singapore market, the STI index's trend has gradually strengthened its linkage with the precious metals sector in recent years. According to SGX data, from January to September 2026, the precious metals sector in the STI index (represented by Zijin Mining ADR and Antam ADR) rose by 25%, higher than the overall STI index gain (18%). This linkage mainly stems from two aspects: first, the increasing demand of Singapore investors for "inflation-hedging assets"; second, the increased weight of the precious metals sector (due to revenue growth of mining companies driving market cap expansion).
For Singapore investors, the current strategy for laying out the precious metals sector should focus on "bottom-fishing" and "diversified allocation":
- Bottom-fishing high-dividend mining companies: Such as Antam, with a dividend yield higher than the market average and strong production growth certainty, suitable for long-term holding. Investors can intervene when gold prices fall below $4,200/ounce to obtain dual returns from "gold price rise + dividend income."
- Focus on new mine commissioning enterprises: Such as Zijin Mining's Serbia copper-gold mine, whose early commissioning will bring production growth over the next three years, suitable for investors with higher risk tolerance. In addition, Philippine mining companies (such as Philex Mining) can also be included in the allocation due to the implementation of new regulations, with future production expected to grow significantly.
- Diversify investment in gold ETFs: Singapore gold ETFs (such as SPDR Gold Shares) have seen continuous growth in holdings, with good liquidity and low trading costs, suitable for small and medium investors. By investing in ETFs, investors can avoid the risk of a single mining company while sharing the gains from rising gold prices.
It should be noted that the valuation divergence of mining companies will continue. Investors should focus on companies' "production growth potential" and "cost control capabilities" to avoid blindly chasing popular targets. For example, Thai Gold's valuation may face further pressure due to production decline, while Antam's valuation still has room for improvement due to new mine commissioning.
5. Future Outlook: Precious Metals Cycle Upward and Opportunities for Singapore Blue-Chip Stocks
Looking ahead to the fourth quarter of 2026, the precious metals market is expected to continue its upward trend. On the one hand, Fed rate cut expectations will become clearer, and the decline in real interest rates will support gold prices; on the other hand, the global central bank gold buying tide will continue, especially from emerging market countries (such as China, India), whose gold demand will become an important support for gold prices. In addition, the industrial demand for silver (photovoltaic, AI chips) will continue to grow, pushing up silver prices.
For Singapore investors, the precious metals sector is an indispensable "dual-track asset for hedging and value appreciation" in the STI index. By laying out ADRs of Asian precious metal mining companies in the US, investors can not only hedge against market volatility but also share the gains from the upward precious metals cycle. At the same time, by combining the trend of the STI index, investors can adjust their allocation ratio, such as increasing the weight of the precious metals sector when the STI index corrects, and appropriately reducing it when the index rises, to achieve an "offensive and defensive" investment strategy.
In conclusion, under the current market environment, the valuation divergence of Asian precious metal mining companies on US stocks provides layout opportunities for Singapore investors. By deeply analyzing the financial performance, valuation logic, and linkage with the STI index, investors can seize the dividend of this precious metals cycle and achieve asset preservation and appreciation.
