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Resources shares drag the Australian share market lower

The Australian share market hasn’t been able to build on yesterday’s gain and is down significantly in morning trade.

The main catalyst for this decline has been sharp falls in the resources sector after commodity prices sank lower overnight.

This has led to the S&P/ASX 200 Resources (Index: ^AXJR) (ASX: XJR) dropping 2.7% this morning. Here is a quick summary of what is happening:

Energy shares

According to Bloomberg, the WTI crude oil price has fallen 3.2% to US$64.90 a barrel and the Brent crude oil price tumbled 2.4% to US$70.75 a barrel. This has led to a number of energy shares sinking lower:

  • The Beach Energy Ltd (ASX: BPT) share price has tumbled 6% to $1.84.
  • The Oil Search Limited (ASX: OSH) share price is down 1.3%.
  • The Santos Ltd (ASX: STO) share price is 1.6% lower.
  • The Woodside Petroleum Limited (ASX: WPL) share price is off 0.6%.

Gold miners.

Australian gold miners have come under pressure today after the gold price fell to an 18-month low. The spot gold price is currently fetching US$1,175 an ounce, down around 10% in the space of two months. With rates rising in the U.S. at a quick pace, I believe the precious metal could come under further pressure over the next 12 months.

  • The Newcrest Mining Limited (ASX: NCM) share price is down 1.4%.
  • The Northern Star Resources Ltd (ASX: NST) share price has fallen 3.5%.
  • The Resolute Mining Limited (ASX: RSG) share price has dropped 2.6%.

Base metals.

According to Metal Bulletin, the price of base metals on the London Metal Exchange plummeted overnight largely due to a sharp risk-off sentiment following volatile currency flows. This collapse in the base metals complex means all base metals, except for aluminium, are now sitting at their lowest levels this year.

  • The BHP Billiton Limited (ASX: BHP) share price is down 3.1%.
  • The Fortescue Metals Group Limited (ASX: FMG) share price is off 3.6%.
  • The OZ Minerals Limited (ASX: OZL) share price has fallen 1.8%.
  • The Rio Tinto Limited (ASX: RIO) share price is down 2.5%.

What now?

While I still remain bullish on the likes of BHP and Rio Tinto, it might be prudent to take a little profit off the table after such strong gains over the last 12 months. Especially if a potential trade war stifles global growth and puts further pressure on commodity prices.

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Motley Fool contributor James Mickleboro has no position in any of the 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 Scott Phillips.

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