If you own shares in Newcrest Mining Limited (ASX: NCM), Northern Star Resources Limited (ASX: NST), or any of the other ASX-listed gold miners, you may want to look away now.
The price of gold plunged by 2.4% on Saturday (Australia time) and dropped US$30 per ounce on the day's opening price of US$1,264.
Above: The day's dramatic gold price fall. Source: Bloomberg.com
Why did the gold price fall?
The sudden fall appeared to coincide with the release of U.S job data figures which were better than most analysts had predicted, signalling that the U.S. economy is alive and well. A strong U.S. economy could trigger higher interest rates and this is bad news for gold which is viewed as a 'safe-haven' for investors when times are bad.
What will it mean for Newcrest Mining?
The plunge is likely to make for a negative start to the week for shares in Newcrest Mining and other listed gold stocks when the market opens this week due to the potential impact on company earnings. Bloomberg reported that shares in some Canadian gold miners sunk as much as 6.6% in response to the gold price fall, on a day when the Standard & Poor's/TSX Composite Index fell just 0.3%.
Before hitting the 'sell' button however, it's important to remember that Newcrest operates on a considerable scale and has performed strongly in the most recent December quarter. Gold price volatility is an inherent risk with owning shares in Newcrest Mining, a risk the company reduces by being among the lowest cost producers.
