The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has risen another 0.4% today, but there is one corner of the market that is falling deeper into the red.
The gold miners have fallen out of favour with investors in recent months, despite beginning the year in unbelievable fashion.
The gold price was soaring at that stage, and even enjoyed one of its strongest three-month periods in more than three decades thanks to growing tensions and uncertainty surrounding the global economy.
However, not even Brexit – Britain’s shock vote to exit the European Union in June – or the election of Donald Trump as the next President of the United States of America has helped boost gold any further.
In fact, after it traded for more than US$1,300 an ounce as recently as November, it has since plunged to just US$1,157. The last time it traded this low was February.
Understandably, shares of the gold miners themselves have also been dragged lower as a result. Today alone, Beadell Resources Ltd (ASX: BDR) has shed 7.3% of its market value, with Northern Star Resources Ltd (ASX: NST) and St Barbara Ltd (ASX: SBM) down 4.4% and 4.6%, respectively.
Newcrest Mining Limited (ASX: NCM), the country’s largest gold producer, has also shed 3% (and has fallen 32.4% since it peaked at $27.20 in July), with Regis Resources Limited (ASX: RRL) also trading 3.9% lower for the day.
Gold itself doesn’t pay interest, nor does it pay a dividend. The only way to make money from it is by selling it to someone else for more than what you paid for it in the first place. This is an issue for the gold miners themselves: they have no control over the price at which they sell the precious metal. When gold falls, so too do their share values, more often than not.
It is virtually impossible to predict with any certainty, and consistency, the direction in which the gold price will travel – as the aftermath of Brexit and the election of Donald Trump have proven. Although gold could rise from here, it could also continue to decline, dragging the gold miners further down as well. Investors may want to think about that risk before taking a punt on the sector.
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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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.