Gold sinks to lowest price in 5 months: More falls to come

Credit: Mark Herpel

So much for the so-called “Trump Trade”.

Buy gold, gold exchange traded funds and gold stocks.

Those investors panicked into the above trades will now be ruing their losses – at least on paper, unless they’ve already sold out.

The spot gold price fell to a five-and-a-half-month low yesterday, as the US dollar rose on strong US economic data and confirmation by US Federal Reserve chairperson Janet Yellen that the central bank would raise rates “relatively soon”.

That could be as early as next month, with markets pricing in a 98% chance of rate hike in December.

No wonder gold is now trading at around US$1,215 an ounce after falling to US$1,210.73 an ounce – the lowest price since June 3, according to Reuters.

The metal has now lost around 9% from the six-week high it briefly reached after the US election – when it surged above US$1,300 an ounce.

It’s the main reason these ASX-listed gold miners are falling today.

Company Price Market Cap % change
St Barbara Ltd (ASX: SBM) $2.17 $1,006.7 -4.4%
Saracen Mineral Holdings Limited (ASX: SAR) $1.01 $826.5 -4.3%
Beadell Resources Ltd (ASX: BDR) $0.36 $406.8 -4.0%
Resolute Mining Limited (ASX: RSG) $1.19 $939.3 -3.9%
Millennium Minerals Ltd (ASX: MOY) $0.26 $214.5 -3.6%
Blackham Resources Ltd (ASX: BLK) $0.56 $159.4 -3.5%
EVOLUTION FPO (ASX: EVN) $1.97 $4,105.1 -3.1%
Northern Star Resources Ltd (ASX: NST) $3.61 $2,202.5 -3.0%
Newcrest Mining Limited (ASX: NCM) $20.85 $16,386.4 -2.6%

Source; Google Finance

Over the past month, many of the above stocks have seen double-digit falls in their share prices, and it could be about to get worse.

If US interest rates rise in December and the US economy continues to remain strong, the US central bank is likely to continue raising rates. That will see the US dollar continue rising, and commodity prices sink further.

The one hope for the gold bulls is if president-elect Donald Trump follows through with his infrastructure spending plan and proposed tax cuts. That could force the US Fed to hold off on rate rises and see the US dollar fall.

Why These 3 Blue Chip Shares Are Set to Soar for Smart Investors

Discover The Motley Fool's Top 3 blue chips for Smart Investors. These 3 'new breed' shares pay fully franked dividends AND offer the prospect of significant capital appreciation. Simply click here to gain access to this comprehensive FREE investment report.

No credit card required!

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

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.