The gold price has been on a one-way ticket south in 2022, having collapsed off 52-week highs of US$2,052/ounce back in May this year.
In what would traditionally be seen as gold's optimum environment – high inflation, volatile markets, geopolitical tensions – the yellow metal has failed to deliver.
The question then becomes of what impact this has on the investment prospects of ASX-listed gold miners, seeing as their share price fluctuates with volatility in the underlying gold markets.
What could this mean for gold players?
Gold has continued lower this past month whilst Treasury yields and the U.S. Dollar have made a glorious comeback from their former depths.
Sparking the comeback – inflation, primarily. Just last week U.S. inflation numbers came in far hotter than anticipated for September, adding to a 'risk-off' sentiment.
Meanwhile, central banks around the world have committed to raising policy interest rates in order to curb inflation.
At the time of writing, the US Treasury 10-year note has a yield of 3.71%, its highest mark since 2009.
This is important to know, as higher bond yields and surging interest rates increase the opportunity cost of holding gold, seeing as the precious metal pays no yield/interest.
The strong U.S. Dollar is also a concern for gold, seeing as both are considered to be 'safe haven' assets in times of risk and uncertainty.
With gold's demise, the U.S. Dollar has simultaneously surged back to multi-year highs, as seen on the chart below with the path of the 10-year yield described above.
The question then becomes of what this means for large gold players such as Northern Star Resources Ltd (ASX: NST).
Looking at its price chart, 2022 hasn't been the best year for Northern Star. Like the gold it mines and produces, it has faltered and now trades around its yearly lows.
This hasn't changed the opinion of brokers covering the share, however. Even after gold's plummet, 100% of brokers still recommend to buy Northern Star shares, according to Refinitiv Eikon data.
This has been unchanged since June at least, and the consensus price target is now $10.70 per share, indicating roughly 30% upside potential at the time of writing.
Nevertheless, pressure continues on the Northern Star share price, and it remains deeply compressed in 2022, needing a large percentage gain to reverse the damage.
Shares are down 19% this year to date and now trade at $7.63, well off former highs of $11.48 on 19 April.
