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Wed, April 5 at 4:00PM ET

GOLD Stock Falls as Fed Meeting Drags Down Gold Prices

  • Barrick (GOLD) slumped today, as investors’ outlook for gold miners has deteriorated.
  • Much of this is due to the Fed’s upcoming rate hike this week, signaling higher rates and a stronger U.S. dollar.
  • Poor earnings from Newmont (NEM) have exacerbated negative sentiment in this sector today.
GOLD stock - GOLD Stock Falls as Fed Meeting Drags Down Gold Prices

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It’s been a rough day for various commodities, including gold. However, for gold miners such as Barrick (NYSE:GOLD), it’s been an abysmal day. Currently, GOLD stock is slipping 3% in today’s afternoon session.

This move likely come ahead of another jumbo rate hike by the Federal Reserve. The Federal Reserve Open Market Committee (FOMC) will meet this week, with yet another rate hike decision set to come down on the market. Today, the market appears to be pricing in bets that yields could go higher, along with the U.S. dollar.

For gold miners, this is a bad combination. That’s mostly because what’s bad for gold prices is even worse for these miners. With high leverage to gold prices, investors often get more upside during gold booms, and worse declines in down markets.

This is evidenced by today’s outsized losses in Newmont (NYSE:NEM), which is down a whopping 13% at the time of writing, and Barrick, relative to the 0.5% downside move in gold.

Let’s dive more into what investors can expect this week.

Is GOLD Stock a Buy in This Market?

It’s certainly interesting to see the incredible moves various gold miners are making today. Notably, much of the downside Newmont has seen is on the company’s worse-than-expected earnings, which were released today.

These poor earnings certainly doesn’t help investor sentiment in this sector today. Therefore, the earnings report may be weighing on GOLD stock as well. With a strong U.S. dollar (which is normally inversely correlated with commodity prices such as gold), and higher interest rates likely (also inversely correlated), gold could be in for more near-term pain. For traders and short-term investors, this could mean a poor setup.

However, for longer-term investors bullish on the idea that rates are likely to remain historically low for a long time, and the U.S. dollar is likely to continue depreciating over time, gold still has its place as a portfolio hedge. The question is when to buy gold or gold miners, given the fact that we may still only be in the early innings of an aggressive rate-hiking schedule.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/gold-stock-falls-as-fed-meeting-drags-down-gold-prices/.

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