Australia’s gold mining shares have been whacked today after the gold price slipped around 1% overnight.
The Newcrest Mining Limited (ASX: NCM) share price has fallen 1.2%, Northern Star Resources Ltd (ASX: NST) share price is down 1.7% and the Beadell Resources Ltd (ASX: BDR) share price is down 3.6%. Others across the sector, including St Barbara Ltd (ASX: SBM) and Regis Resources Limited (ASX: RRL), are also trading in the red.
As reported by The Australian Financial Review, a “fat finger” or erroneous order may be behind the sudden sharp decline, or else by technical concerns. The AFR noted that gold futures fell as much as 1.6% at one point to US$1,236.50 an ounce, with the spot price trading for US$1,242.20 at the time of writing.
The gold price has declined around 6% over the past 12 months, and more than 22% over the past five years. Although investors in the sector have made some solid returns at various stages during those periods, they do run the risk of heavy losses should the gold price continue to decline.
Indeed, one factor that may cause the gold price to fall below its current level is if (or when) the United States Federal Reserve hikes interest rates again. A stronger US dollar could also have a negative impact on the price of the shiny metal.
That isn’t to say investors should never invest in the sector, but it is by no means without risks.
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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.
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