Gold companies take another hammering

Look out below! The gold price has fallen to its lowest level in two years and shares in companies involved in gold exploration and production took a hammering yesterday in response.

Gold fell to US$1,319 per ounce following news from the US that the US Federal Reserve may slow the rate of bond purchases later this year – a signal the economy could be on the improve.

Smaller miners were hit the hardest as investors took flight. Gold exploration company Regis Resources (ASX: RRL) dropped 4.8%, while Medusa Mining (ASX: MML) lost 7.3% and Beadell Resources (ASX: BDL) was slashed by a huge 10%.

Newcrest Mining (ASX: NCM) fared better than most, but continued its weeklong plunge and prolonging the pain for investors as its shares dropped 3.6%. Newcrest has lost 26% in the last month alone after announcing a series of write-downs and budget reductions at the start of the June.

All four companies far outpaced the 2.12% drop in the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), a reminder of the value of holding a diversified portfolio of shares.

Foolish takeaway

As the US economy continues to show signs of recovery it is possible the pressure on gold prices, and gold mining companies, will continue as investors rush for the exits.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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