Why are the ASX 200 gold miners losing ground this past month

Precious metals have come under pressure amid speculation of rising interest rates.
The post Why are the ASX 200 gold miners losing ground this past month appeared first on The Motley Fool Australia. –

S&P/ASX 200 Index (ASX: XJO) gold miners have been struggling over the last month.

While the ASX 200 itself is down 1.8% since this time in November, the big gold miners have retraced far more.

The Newcrest Mining Ltd (ASX: NCM) share price, for example, is down 9.3% over the last month, currently trading at $22.84 per share.

The Evolution Mining Ltd (ASX: EVN) share price is $3.80 at time of writing, down 8.1% over the month.

And the Northern Star Resources Ltd (ASX: NST) share price has fallen 14.7% in that same time, currently trading for $8.94.

Combined, the 3 ASX 200 gold miners have lost 11.0% over the month.

So, what’s going on?

Gold prices are sliding

While there are many specifics impacting each individual ASX 200 gold miner’s share price, the falling gold price has certainly posed an unwelcome headwind for shareholders of all 3 big miners.

One month ago, gold was trading for US$1,863 (AU$2,586) per troy ounce. Today that same ounce is worth US$1,783, down 4.3%. The ASX 200 miners’ shares are all down significantly more than 4.3% as they’re leveraged to the price of gold.

Now you might think that gold, classically considered a haven asset, would be appreciating with renewed uncertainty surrounding the global pandemic. But that uncertainty is being outweighed by increasing confidence among investors that interest rates are going to rise sooner and faster than expected.

Yesterday (overnight Aussie time) in the United States, Federal Reserve chair Jerome Powell labelled inflation “one of the two big threats” to the US economy and jobs market. With that threat in mind, the Fed signalled its intention to raise the US benchmark interest rate 3 times in 2022.

Other central banks are forecast to follow suit.

The Reserve Bank of Australia (RBA) is widely expected to increase its benchmark rate at least twice next year as well.

Rising interest rates tend to drag down the price of precious metals like gold. Gold, after all, doesn’t pay any interest, and as rates rise, the relative cost of holding gold compared to interest-bearing assets also goes up.

It’s not all bad news for the ASX 200 gold miners

That’s the month gone by.

Looking ahead, the outlook for the ASX 200 gold miners could be improving, with many analysts predicting gold will hold up well over the coming months.

According to Bart Melek, global head of commodities strategy at TD Securities (quoted by Bloomberg):

The dots have moved and it seems the gold market believes that inflation will be elevated, but controlled, which should allow the US central bank to maintain accommodation.

Real rates will move higher, but still very negative along the short end of the curve. It’s still a decent environment for gold. Some traders may have been positioned for something more hawkish.

How have these ASX 200 gold shares performed longer-term?

Taking a longer-term view on our ASX 200 gold shares, the Northern Star share price is down around 26.7% over the past 12 months; Evolution shares have lost 22.6%; and shares in Newcrest Mining are down more than 15%.

By comparison, the ASX 200 has gained 9.1% since this time last year.

The post Why are the ASX 200 gold miners losing ground this past month appeared first on The Motley Fool Australia.

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More reading

5 things to watch on the ASX 200 on Thursday

Why is Macquarie bullish on the Newcrest (ASX:NCM) share price?

Evolution (ASX:EVN) share price falls despite completing Mt Carlton sale

5 things to watch on the ASX 200 on Wednesday

Newcrest (ASX:NCM) share price slides despite US$37 million payday

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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