Plunging gold sparks sale of mining stocks
A sharp drop in the gold price for the second time in a month rattled Australia's fourth-largest mineral export industry, with gold producers making up seven of the top 10 losers on the ASX200 on Thursday.
Gold fell to $US1375 an ounce late on Thursday, sinking more than 2 per cent in a five-day losing streak that saw it hit two-year lows.
Copper fell to its lowest level in nearly two weeks on the back of soft data from the US, Europe and China. Iron ore, Australia's biggest export item, fell to a 2013 low of $US126.40 a tonne.
Morgan Stanley commodities analyst Joel Crane said while fundamentals in commodities remained good, "many investors clearly feel there are more compelling places to invest at the moment" due to "uncertainty over growth and stronger supply growth."
FC Stone analyst Edward Meir expected gold prices to keep softening, reversing a rally following the price collapse in April. "We could eventually test those old lows and take them out over the course of the summer," he told Bloomberg TV.
Shares in gold giant Newcrest Mining fell 5.3 per cent to finish at $15.02, while Evolution Mining, Australia's fourth-biggest gold producer, suffered a sharp 11.23 per cent fall in its share price.
Mr Crane said recent weakness in commodity prices was driven by uncertainty over China's macroeconomic outlook and a slowing in demand. Despite the commodities market softness he believed most prices were bottoming out as downward pressures reduced. "Commodities are generally quite forward-looking, and the market was right to pare back at the beginning of the year," he said.
Jordan Eliseo, chief economist at precious metal supplier ABC Bullion, said the market was in a "corrective phase".
"The incredible rally in the US dollar ... has weighed down sentiment in precious metals due to the inverse correlation with the dollar and gold."
Frequently Asked Questions about this Article…
The article says an overnight fall in the gold price below US$1,400 (to about US$1,375) — part of a five-day losing streak and two-year lows — sparked the sell-off. Commodities slipped on weak global economic data and a strengthening US dollar, which pushed investors away from precious metals.
Gold producers made up seven of the top 10 losers on the ASX200 during the sell-off, reflecting the drop in the gold price. The article highlights that mining shares were rattled as commodities overall weakened, contributing to notable declines in listed gold companies.
The article names Newcrest Mining and Evolution Mining as being hard hit: Newcrest shares fell 5.3% to finish at $15.02, while Evolution Mining suffered an 11.23% fall in its share price.
Morgan Stanley analyst Joel Crane said fundamentals remain good but investors are finding more compelling places to invest amid growth uncertainty and stronger supply growth. FC Stone's Edward Meir expects gold prices to keep softening and possibly test old lows over the summer, while Jordan Eliseo of ABC Bullion called the market to be in a 'corrective phase.'
The article reports the market reaction and presents analysts' views but does not give direct buy-or-sell advice. It notes investor caution driven by uncertainty over growth, supply and a strong US dollar, with differing analyst expectations about whether prices will bottom or soften further.
The article explains that the rally in the US dollar has weighed on sentiment in precious metals because of the inverse correlation between the dollar and gold, contributing to downward pressure on gold prices.
Yes — copper fell to a near two-week low on weak data from the US, Europe and China, and iron ore fell to a 2013 low of US$126.40 a tonne. These moves signal softer demand and wider commodity market weakness, which can affect resource-heavy markets and investor sentiment.
The article presents mixed signals: Joel Crane suggested many commodity prices were bottoming as downward pressures eased, while Edward Meir expected gold to keep softening and possibly break old lows. This reflects uncertainty among analysts about near-term direction.
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