S&P/ASX 200 Index (ASX: XJO) gold shares are underperforming the benchmark index on Friday. Though not all of the big gold producers are trading lower today, despite bullion prices dipping to two-week lows.
In afternoon trading, the ASX 200 is up 1.9%, following a strong day in US markets overnight.
The S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller gold shares outside of the ASX 200 – is heading in the other direction, down 0.7%.
As for some of the big ASX 200 gold shares:
- Northern Star Resources Ltd (ASX: NST) shares are down 1.1%
- The Newcrest Mining Ltd (ASX: NCM) share price is down 0.5%
- The Evolution Mining Ltd (ASX: EVN) mining share price is bucking the trend, up 0.5%
What's happening with the gold price?
Though gold has edged higher over the past few hours to US$1,668 per ounce, earlier today, bullion prices dipped to two-week lows. Prices remain down 3.5% since 5 October and down 19% from the highs in early March.
Gold, and by extension ASX 200 gold shares, have come under pressure amid fast-rising interest rates intended to tame soaring inflation. And September CPI data out of the US yesterday showed little sign that inflation in the world's top economy is close to tame just yet. This portends more rate hikes ahead from the US Federal Reserve.
Gold is a haven asset, a status that has helped support prices amid 2022's increasing geopolitical and global economic risks.
But the headwinds of aggressive central bank tightening have proven the stronger force. At least for now. Gold pays no yield. And as rates rise, so too does the appeal of other haven assets, like government bonds and cash deposits, in turn decreasing demand for bullion.
The hawkish rate hiking path taken by the Fed has also seen the US dollar rally. That's also impacted gold, as it's priced in US dollars.
Though it's worth noting the gold price in Aussie dollars has fared much better. The Aussie dollar is now down to 63.4 US cents, from 75.8 cents in early April.
How have these ASX 200 gold shares performed longer-term?
All three of the ASX 200 gold shares we looked at above are deep in the red so far in 2022.
Going back five years, only one of the gold miners has returned outsized capital gains.
Over the five years, the Newcrest Mining share price is down 19%, and the Evolution share price is down 15%.
However, if you'd invested in Northern Star five years ago, you'd be sitting on a gain of 60% today.
