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Gold shares hammered as the gleaming metal loses its lustre

Credit: Mark Herpel

Shares in ASX-listed gold miners have been hammered today after spot gold prices fell 2% to US$1,050.74 an ounce overnight.

At the close, this is how the gold shares fell…

Troy Resources Ltd (ASX: TRY) share price plummeted 8.5% to $0.22

Resolute Mining Limited (ASX: RSG) share price sank 7.7% to $0.24

Kingsrose Mining Limited (ASX: KRM) share price fell 7% to $0.20

Beadell Resources Ltd (ASX: BDR) share price dropped 6.9% to $0.14

Perseus Mining Limited (ASX: PRU) saw its share price slide 5.7% to $0.33

Ramelius Resources Limited (ASX: RMS) shares slipped 4.8% to $0.20

EVOLUTION FPO (ASX: EVN) saw its share price down 4.7% to $1.41

Medusa Mining Limited (ASX: MML) shares fell 4.2% to $0.34

Northern Star Resources Ltd (ASX: NST) saw its share price swoon 4% to $2.64

Doray Minerals Limited’s (ASX: DRM) share price closed down 3.5% to $0.55

Newcrest Mining Limited (ASX: NCM) share price dropped 3.4% to $12.40

The spot gold price dropped to its lowest levels since October 2009 earlier this week, with higher US interest rates the main cause. As rates move higher, other assets begin to look more attractive and gold tends to get sold off. US Treasury yields have a strong negative correlation, while a stronger US dollar has an even closer inverse correlation to commodities prices.

US Treasurys versus gold price chart

The US dollar has gained 11.7% against the currencies of its major trading partners recently.

With the US Federal Reserve signalling further interest raises on the cards in 2016, gold prices could fall further from here.

The good news for Australian gold miners is that the Australian dollar is already falling against the US dollar, currently buying US 71.2 cents, and is likely to continue falling. A falling Aussie dollar could offset the impact of the falling gold price, but it seems investors in ASX-listed gold producers aren’t having any of that.

In Australian dollar terms, spot gold is A$1,475 an ounce, allowing many to generate decent margins against their all-in sustaining costs (AISC) of between A$1,000 and A$1,100 an ounce.

Foolish takeaway

Risky at the best of times, investing in gold shares is not for the faint-hearted. Having learnt my lesson, I’m steering well clear of the sector.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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