The sell-off in local gold equities in the last two months – with the exception of Northern Star which has pogoed higher – has been remarkable stuff.
Market leader Newcrest is down 14%, which is bad enough in itself. Then there is the 22% hit on Evolution, St Barbara’s 24% slide, and Regis’ 20% fall.
It is remarkable stuff because while the US dollar gold price is off by about $US60 or 5% to just under $US1,200/oz, the Aussie price at more than $A1,660/oz is “only” off by $A20, or 1.2%, due to the slide in the US exchange rate.
More to the point is that the current local price is comfortably ahead of last (calendar) year’s average of $A1,638 an oz.
Given the local industry is still minting $A500-plus/oz margins, the sell-off in the past two months does look overdone.
Having said that, there is no denying that it is sentiment around the US dollar gold price that is a key factor in the pricing of ASX gold producers.
So a share price rebound from here for the savaged ASX listed producers will require a recovery in the US dollar gold price. Can it do that? Macquarie’s commodity desk pondered the same thing yesterday.
“Continually hit by a strong dollar, higher yields, weak physical demand, rising shorts….the list goes on. At times like these, it’s difficult to even imagine it going up,” Macquarie said. Read more on the sell-off in local gold equities in the last two months.
