Gold miners CRUSHED: Are there more declines to come?

The Resolute Mining Limited (ASX: RSG) share price is one of many dragging down the S&P/ASX All Ords Gold (Index:^AXGD) (ASX:XGD). Is it time to take profit?

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It looks as though Australia's leading gold miners are going to finish the week with yet another sharp drop.

In morning trade the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) has fallen a whopping 3.6% to 4,290 points, bringing its weekly decline to a massive 10.5%.

Why did the index fall?

Overnight the spot gold price fell 1% to US$1,234 an ounce after the probability of a March rate hike in the United States increased.

According to CME Group, the probability of a rate hike at the Federal Reserve's meeting later this month has now risen to 75.3%. Furthermore, the probable of a second hike at the June meeting widened to 40%.

As rates in the United States normalise I expect bond and fixed income investments will become attractive to investors, whereas yield-less gold is likely to lose its appeal.

I feel this is likely to push the gold price significantly lower, reducing the profitability of Australia's gold miners.

It would appear as though many in the market feel the same way. The Resolute Mining Limited (ASX: RSG) share price is amongst the worst performers on the market today with a 7% drop.

Other notable declines include Regis Resources Limited (ASX: RRL), St Barbara Ltd (ASX: SBM), Northern Star Resources Ltd (ASX: NST), and Ramelius Resources Limited (ASX: RMS).

Should you buy the dip?

Whilst the majority of Australia's gold miners will remain profitable even if the gold price drops to US$1,000 an ounce, I believe the reduction in profitability will weigh heavily on their respective share prices for some time.

For this reason I think now would be an opportune time for investors to take profit on gold mining investments and move to other areas of the market like the information technology or healthcare sectors.

Motley Fool contributor James Mickleboro 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.

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