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Here’s why ASX gold miners are collapsing today

All seems to be well on the S&P/ASX200 (ASX: XJO) today. ASX banks are up, growth shares are booming, and all is well with the world.

Unless you have any exposure to gold, that is. Gold miners are leading the red ink sales today, with the S&P/ASX All Ordinaries Gold Index (ASX: XGD) down around 3%.

Here are how some other ASX gold miners are looking this afternoon:

  • Newcrest Mining Ltd (ASX: NCM) shares ended last week at $36.85 but are 3.2% lower today at $35.64
  • Northern Star Resources Ltd (ASX: NST) were sitting at $11.40 on Friday, but today are 2.75% lower and are going for $11.10.
  • Regis Resources Ltd (ASX: RRL) is down a nasty 6.6% from $5.06 on Friday to $4.72 today.
  • Saracen Mineral Holdings Limited (ASX: SAR) is also down a hefty 5.06% to $3.38 after ending last week at $3.56.

Why are ASX gold miners dropping?

Well, as usual, it’s all about the price of gold. After spending August going on a tear and hitting the US $1,500 per ounce level for the first time since 2013, gold peaked at around US $1,546 last week. However, this trend’s momentum has rapidly reversed on the back of US Federal Reserve chairman Jay Powell stating over the weekend that he doesn’t see a recession in sight and flagging further easing of US monetary policy (read cutting interest rates). This came after the US Department of Labor released statistics showing US employment levels remain strong.

Gold is the traditional ‘safe haven’ asset and therefore positive economic news typically puts downward pressure on the gold price.

What’s next for ASX gold miners?

Trends like the rising gold price in August can create ‘momentum snowballs’, where each additional dollar increase in the price of gold (in this case) creates an accelerating flood of capital into gold shares. Once this peaks and reverses, large falls like we are seeing today are a normal accompaniment. What the ASX gold miners’ shares do next is almost entirely dependent on the price of gold going forward – and (sorry to say) I can’t give much insight on that.

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Motley Fool contributor Sebastian Bowen 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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