S&P/ASX 200 Index (ASX: XJO) gold stocks, including Evolution Mining Ltd (ASX: EVN), Newmont Corp (ASX: NEM), and Northern Star Resources Ltd (ASX: NST) shares, have been walloped since the outbreak of the Middle East war.
Here's what I mean.
Since the close of trade on 2 March – the first day of trading following the onset of the war – the ASX 200 has fallen 5.8%.
Here's how these three top ASX 200 gold stocks have performed over this same period:
- Northern Star shares are down 40.3%
- Evolution Mining shares are down 31.5%
- Newmont shares are down 19.0%
Image source: Getty Images
Why have ASX 200 gold stocks been underperforming?
First, I should mention that Northern Star shares have taken a harder hit than most gold producers, primarily due to recent full-year production downgrades and rising cost forecasts.
But all three ASX 200 gold stocks have been sold off amid a material retrace in the gold price.
Indeed, on 2 March, gold was trading for US$5,322 per ounce. Three and a half weeks later, on 26 March, gold had plunged some 18% to US$4,376 per ounce.
The yellow metal has recovered somewhat from those lows to be trading for US$4,519 today. But that's still 15% below the levels it was trading at before the Iran war.
Why has the gold price plunged since the onset of the Iran war?
The declining gold price that's pressured the likes of Northern Star, Evolution Mining, and Newmont shares, was puzzling to some investors, since gold is well known as a haven asset in times of uncertainty.
However, that haven status was overrun by the pressure gold faced as global energy prices rocketed, spurring inflation and investor concerns for higher interest rates ahead.
Gold, which pays no yield itself, tends to perform better in low or declining interest rate environments.
Emanuel Datt, founder of investment firm Datt Capital, noted that the gold price – and by connection ASX 200 gold stocks – also fell as some nations sold off part of their gold reserves.
"Gold is an asset class that has been sold off as countries such as Turkey have been liquidating gold reserves to be able to pay costs from higher energy prices," Datt said (quoted by The Australian Financial Review).
But when, not if, a resolution is reached and the Strait of Hormuz reopens, oil prices should come down quickly. This, in turn, will ease global inflationary pressures and central banks' need to hike interest rates.
"The time pressure is weighing on both sides of the war, but I think that we're getting closer to a deal," Datt said.
Atop Newmont and Northern Star shares, Datt also believes Vault Minerals Ltd (ASX: VAU) and Ramelius Resources Ltd (ASX: RMS) are well-placed to rebound.
ASX 200 gold stocks jumping on new truce hopes
This morning, investors learned that US and Iranian negotiators had agreed to a 60-day truce. A deal that's still awaiting US President Donald Trump's approval.
For some idea of the potential rebound on offer from ASX 200 gold stocks should the truce take hold and lead to a definitive end of the conflict, here's how these top Aussie gold miners are tracking today on the mere hopes of a pause:
- Northern Star shares are up 4.5%
- Ramelius Resources shares are up 3.5%
- Vault Minerals shares are up 3.6%
- Evolution Mining shares are up 4.0%
- Newmont shares are up 4.0%
