The price of gold fell for the fourth consecutive session overnight, slipping another 0.3% to roughly US$1,174 an ounce following a report which showed the US economy had contracted less than anticipated in the first quarter.
Gold is a popular resource amongst investors in times of economic uncertainty thanks largely to its durability. However, the recent figures from the US government indicated an improvement in economic conditions which could increase the likelihood of an interest rate hike by the end of the year. Indeed, some economists are even forecasting two rate increases, which poses a key threat to the shiny metal's price.
As is the norm across the resources industry, gold miners have no control over the price at which they sell their product and hence rely on higher gold prices to boost their revenue and overall earnings results. As such, a falling price and greater certainty in the world's largest economy doesn't bode well for the resource itself, nor the miners which produce it.
While the Australian benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) index has fallen 0.6% for the day so far, the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) has suffered a 1.2% decline. Newcrest Mining Limited (ASX: NCM) has been one of the biggest losers for the day with its shares trading 1.9% lower at $12.95. Nearly 11% has been wiped from Newcrest's share price over the last month, although it has still achieved a 19% gain since the beginning of the year.
Meanwhile, EVOLUTION FPO (ASX: EVN) and Beadell Resources Ltd (ASX: BDR) have fallen 2.1% and 5.1% for the day, respectively, while Northern Star Resources Ltd (ASX: NST) has managed to buck the trend, rising 1.1% to $2.275 per share.
Although it seems as though gold prices could have further to fall, forecasting future prices is fraught with problems and relies heavily on luck. While the risk of further falls should be enough to deter some investors from even considering an investment in the sector, others should make sure to focus on the lowest cost producers with proven reserves and high grades, which are likely to be your safest bets.
