It could be a challenging day of trade for many of Australia's leading gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) on Wednesday.
This follows a shocking night of trade for the spot gold price, which crashed materially lower following a return of risk appetite.
What happened to the gold price?
According to CNBC, the spot gold price has crashed 5.8% lower during overnight trade to US$1,921.8 an ounce. This is over US$150 lower than Friday's record high of US$2,072.5 an ounce.
The silver price hasn't fared well, either. The fellow safe haven asset is down a massive 15% to US$24.86 an ounce at the time of writing. This could be bad news for South32 Ltd (ASX: S32). Its shares have been rising on the back of the improving silver price in recent weeks.
Analysts believe the improving risk appetite is due to better than expected economic data and news of a potential Russian coronavirus vaccine.
Edward Moya, senior market analyst at broker OANDA, told CNBC: "This feels like a mini crash. We could not overcome the early morning headlines of a Russian potential vaccine, and there was just continued optimism flowing into stocks."
This sentiment was echoed by Bart Melek at TD Securities. He told clients: "The precious metals complex was driven by a drop in rates, a steady increase in inflation expectations and a falling U.S. dollar. The rally is now giving up some of these gains as these drivers lose momentum."
Mr Melek also notes that the trade became crowded, which is why the pullback has been particularly severe.
"Speculators and Commodity Trading Advisors (CTAs) are reducing their gold and silver exposure, as volatility trends higher and as they take profits out of a crowded trade," he explained.
Given how strongly the shares of Evolution Mining Ltd (ASX: EVN), Saracen Mineral Holdings Limited (ASX: SAR), and other gold miners have rallied in recent months, it unfortunately looks set to be a very red day for their shares on Wednesday.
