Shares in some of Australia’s most prominent gold miners were sent tumbling lower on the ASX on Monday as global gold prices experienced their biggest one-day fall in the last 12 months.
What happened to the gold miners yesterday?
It wasn’t better news for Newcrest Mining Ltd (ASX: NCM) investors, with the company’s share price dipping 2.16% to close at $31.26 per share – still not that far shy of its $32.74 52-week high level.
Why were gold prices hammered lower?
Global gold prices plummeted lower after President Donald Trump and Chinese leader Xi Jinping met at the G20 Osaka Summit and agreed to resume US-China trade negotiations.
While this was good news for domestic markets in general, with the S&P/ASX200 Index (ASX: XJO) climbing 29.3 points (+0.44%) to 6,648.10, investors’ bullish sentiment seemed to push more money into equities and away from the safe-haven of gold.
The result saw some of Australia’s biggest gold miners’ share prices fall as gold prices fell below the US$1400 per ounce level after rallying to a 6-year high of $1,439.21 on June 25.
Global trade tensions, mostly involving the US-Iran and US-China sagas, have created risk-off moves in markets so far this year and continued to push gold prices higher throughout the majority of 2019.
This has led to the likes of Northern Star and Newcrest seeing their share prices surge 21% and 44% so far this year to outperform the S&P/ASX200 and deliver strong returns to investors.
Where to now for the gold miners?
The gold price is clearly very dependent on macro conditions, and the most prominent of those is the US-China trade war.
Should the trade war continue and the tit-for-tat tariffs resume (i.e. if talks breakdown) then I would expect investors to seek shelter in gold once again which would push prices higher and boost the profitability for the ASX miners.
However, if we see Trump and Xi Jinping’s respective teams make a breakthrough and clear the path for greater economic trade and boost global GDP, I would expect to see gold continue to depreciate and the ASX gold miners to see declines in the second half of the year.
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Motley Fool contributor Kenneth Hall 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.