Asian gold mining stocks fell broadly on Monday after bullion dropped more than 3% on Friday, as hawkish comments from Federal Reserve Chair Kevin Warsh boosted expectations for a September rate hike. Miners across China and Australia declined, though Shandong Gold bucked the trend on strong earnings.
Asian gold mining stocks fell broadly on Monday, tracking a sharp drop in bullion prices after Federal Reserve Chair Kevin Warsh signaled the central bank still has work to do on inflation. Spot gold fell to about $4,567 an ounce on Friday, its lowest since August 20, as the dollar strengthened and Treasury yields rose.
Warsh comments drive rate-hike bets
Warsh said inflation had not shown enough underlying improvement and indicated the Fed still had work to do to bring price pressures back toward its 2% target. As a result, markets raised the probability of a September rate increase to around 58%, from about 36% previously, undermining demand for gold, which does not generate interest income.
The selloff followed an unusually strong run for bullion. Gold had climbed above $4,600 an ounce and reached a more than three-month high of $4,696.18 on August 25, helped initially by a weaker dollar, concerns over U.S. fiscal conditions and the Treasury's decision to expand purchases of longer-dated government bonds.
Chinese and Australian miners decline
Lingbao Gold fell 5.7% to HK$22.34, Zijin Gold International dropped 5.4% to HK$152.50 and Zhaojin Mining fell 2.5% to HK$23.34. Shandong Gold, however, bucked the trend with an 8.1% gain to HK$27.58.
Australian miners were also lower. Westgold Resources fell 5.1%, Regis Resources dropped 4.3% and Northern Star Resources fell 5.5%. The broader weakness extended across the region, with Sumitomo Metal Mining down 3.5%, Chifeng Jilong Gold Mining off 4.3%, Zijin Mining down 4% and Newmont down 3.5%.
Shandong Gold is the exception
For gold miners generally, the reversal in bullion prices threatens to take some of the earnings momentum that had supported the sector's recent advance. Companies with higher-cost operations can be particularly sensitive to changes in realized gold prices, because revenue falls while many mining costs remain relatively sticky.
Shandong Gold's outperformance stands as an exception. The stock extended its gains after a strong first-half earnings report, in which the company reported attributable net profit of RMB3.54 billion, up 26.2% year over year, while lower operating costs helped support margins despite weaker revenue.
Source: Investing.com
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