S&P/ASX 200 Index (ASX: XJO) gold shares have been struggling in 2022.
Granted, it's been a tough year for most stocks outside of the energy sector, as witnessed by the 9.5% year-to-date drop in the ASX 200.
But gold stocks have broadly suffered far steeper falls. The S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold shares – is down 27.4% this calendar year.
As for the bigger players, here's how they've held up so far in 2022:
- Newcrest Mining Ltd (ASX: NCM) shares are down 30.4%
- Evolution Mining Ltd (ASX: EVN) shares are down 45.5%
- Northern Star Resources Ltd (ASX: NST) shares are down 22.2%
- Regis Resources Ltd (ASX: RRL) shares are down 16.8%
So why are ASX 200 gold shares struggling lately?
What's impacting the big gold producers?
The gold miners have faced a number of unwelcome headwinds over the past months.
First, the price of the yellow metal they dig from the ground has been sliding amid fast-rising interest rates. Gold offers no yield. So, when interest rates run higher, it increases the appeal of other haven assets, like cash or higher-yielding bonds.
Bullion reached US$2,050 per ounce on 28 March but has since trended lower as the US Fed and other central banks ramp up rates. Gold is currently trading for US$1,718 per ounce.
ASX 200 gold shares are also being hit with significantly higher costs and a shortage of workers.
According to Datt Capital principal and chief investment officer Emanuel Datt (courtesy of The Australian):
Gold miners across the board are suffering from labour cost increase and shortages in terms of availability. In addition, Evolution's all-in-cost per ounce of gold produced rose more than 20%, reflecting higher labour costs but also higher capital expenditure needed to maintain production rates.
The Evolution share price, as mentioned above, is down a painful 45.5% in 2022.
With the European Central Bank (ECB) expected to announce it will ramp up rates across the eurozone when the members meet this week, ASX 200 gold shares will likely continue to face pressure on the interest rate front.
On the other side of the coin, any further global geopolitical tensions — of which there are unfortunately plenty — would boost the outlook for gold prices by stoking demand for the classic haven asset.
How have these ASX 200 gold shares performed longer-term?
ASX 200 gold shares are prone to some strong cyclical ups and downs, potentially delivering some big gains, or losses, depending on when investors buy and sell the stock.
For long-term buy-and-hold investors, only one of the miners named above is in the green over the past five years. Namely Northern Star, up 33%.
Meanwhile, Newcrest is down 27% over the five years; Evolution is down 16%; and Regis is down 61%.
