ASX gold shares fall hard. Is now the time to buy?

Many investors see gold as a store of value in inflationary times.

| More on:
A woman wearing a gold top and carrying a gold bar gives the thumbs down signal as she leans against a wall with a sombre look on her face as the Kingsgate share price goes lower

Image source: Getty Images

Key points

  • ASX gold shares broadly trailing the index
  • Gold prices sliding
  • Goldman Sachs releases bullish outlook for the yellow metal

ASX gold shares are taking a beating today.

The broader S&P/ASX 200 Index (ASX: XJO) itself is down 2.2% at time of writing. That brings it into official correction territory, down 10.3% so far in 2022. (Details here.)

But some of the top ASX gold shares are doing it far harder.

Newcrest Mining Ltd (ASX: NCM), for example, is down 4.8% today. Meanwhile the Northern Star Resources Ltd (ASX: NST) share price has dropped 7.9% today.

Trailing the pack is ASX 200 gold share Evolution Mining Ltd (ASX: EVN), down 11.4% today and 15.2% in 2022. Atop the wider woes impacting share markets in general and gold stocks in particular, investors appear to be pushing down the Evolution share price following the company’s quarterly update this morning.

What’s happening with gold?

ASX gold shares are under particular strain this week with a slipping gold price. Gold came under renewed pressure following hawkish comments from US Federal Reserve chair Jerome Powell, which caught many investors by surprise.

Gold, which doesn’t pay a yield, is viewed by many analysts as a store of wealth, and so often falls in the face of rising interest rates.

Since Wednesday the yellow metal has fallen 1.8%, currently trading for US$1,815 (approximately AU$2,545) per troy ounce.

As for our ASX gold shares, gold miners are said to be leveraged to the price of gold. That’s largely because their fixed costs are, well, fixed. Meaning any rise or fall in the price of bullion directly impacts their bottom line.

Take a step back to 2 June, when the gold price stood at US$1908 per ounce, 5% above today’s level, and you can see how ASX gold shares have performed as gold slides.

Since 2 June, the Newcrest share price has dropped 17.9%; Northern Star shares are down 24.9%; and Evolution mining has lost 34.2%.

The ASX 200 is down a more subdued 5.6% over that same period.

To be sure, there are many factors at play in determining the share price of gold miners. But the gold price is certainly a big one.

Why things could be looking up for ASX gold shares in 2022

While gold has come under pressure from expectations of rising interest rates, the yellow metal still has appeal for many as an inflation hedge and a haven asset during times of global conflict.

Goldman Sachs, for one, believes bullion is set for a solid run higher.

As Bloomberg reports, following Powell’s hawkish comments on a slowing global growth outlook alongside higher inflation, Goldman raised its 12-month outlook for gold to US$2,150 an ounce, up from US$2,000. That’s some 13% above today’s price.

According to Bloomberg analyst Mikhail Sprogis, “This combination of slower growth and higher inflation should generate investment demand for gold, which we consider to be a defensive inflation hedge.”

If Goldman has this one right, it should also provide some significant tailwinds for ASX gold shares.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

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.

More on Gold

plummeting gold share price

If gold is regarded as a ‘safe-haven’ asset, why is the Newcrest share price still tumbling?

Why hasn't gold and gold miner Newcrest been a better safe haven for ASX investors?

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them as the Newcrest share price rises and the ASX 200 gold miner pays its interim dividend today
Broker Notes

Why are brokers so bullish on the Northern Star share price?

Brokers see plenty of upside for the gold miner in 2022.

Read more »

gold, gold miner, gold discovery, gold nugget, gold price,

What’s happening with the Northern Star share price on Tuesday?

Exploration activities have replaced the gold reserves lost to mining depletion.

Read more »

an older man wearing thick gold chains and a baseball cap on the side looks glumly at the camera.

Own Newcrest shares? Here’s how the share price performed in April

We check the performance of the gold miner's shares over the last month.

Read more »

a woman in a business suit holds a large solid gold bar in both hands with a superimposed image of a gagged gold line tracking upwards and featuring a swooping curved arrow pointing upwards.

Can the gold price surge above US$2,000 again this year?

Where to next for the gold price?

Read more »

A man wearing 70s clothing and a big gold chain around his neck looks a little bit unsure.

Why aren’t ASX gold shares performing better in these uncertain times?

Should gold be shining brighter in 2022?

Read more »

A little girl wearing a gold crown sulks and pokes her tongue out.

Firefinch share price tumbles 6% despite meeting gold production guidance

The miner forecasts a significant increase in the pace of its gold production for the second half of the year.

Read more »

an unhappy miner poses with gloved hand on face wearing a hard hat with a light and frowning.

Perseus Mining share price slips despite record quarter

Investors aren't biting today despite the gold exploration company's strong result.

Read more »