Why the Northern Star (ASX:NST) share price sank nearly 3% on Friday

Shares in the Aussie gold miner closed lower on Friday afternoon.

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gold bars falling to the ground and smashing representing falling prices of ASX gold shares

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Friday saw a tough end to week the Northern Star Resources Ltd (ASX: NST) share price. Shares in Australia’s largest miners of the precious metal closed the week lower as gold prices tumbled lower in overnight markets.

Why the Northern Star share price sank nearly 3% on Friday

Let’s rewind back to 2020. Many ASX shares were under pressure amid the coronavirus pandemic but gold shares were outperforming.

A massive government cash vc splash both domestically and abroad meant more money circulating in the economy to try and put the economy on life support in dealing with COVID-19. However, one side effect of this stimulus was the impact it would have on inflation.

Gold has often been viewed as a good hedge against inflation. As a result, gold prices surged to all-time highs in 2020 and many in the market expected the good times to continue rolling.

However, the Northern Star share price has now fallen nearly 38% in the past 12 months. That’s largely thanks to the performance of the underlying commodity it produces.

Surprising US government data has hit the gold price hard in recent days. In fact, gold prices are now at their lowest point in the last 5 months following significant falls.

Gold dropped more than US$40 per ounce on Thursday as stronger than expected retail data put pressure on the precious metal.

A stronger retail sector could be seen as a sign that the economy is performing better than expected, which indicates increased likelihood of tapering from the US Federal Reserve and a higher interest rate environment. Given higher rates have historically been used to keep inflation in check, that’s not good for gold prices.

The Northern Star share price closed 2.8% lower on Friday afternoon following the gold price slump. Investors will likely be watching closely on Monday to see if there are gains to be had in the weeks ahead.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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