Gold Miner Shares Down After US Fed Meeting

What happened to Australian Gold Miner Shares?

Australian gold miner shares fell after the US Federal Reserve´s meeting yesterday.

Resolute Mining Limited [ASX:RSG] lost the most value at 5.48%, at time of writing. Northern Star Resources Ltd [ASX:NST] ST Barbara Ltd [ASX:SBM],  Galaxy Resources Ltd [ASX:GXY],  Evolution Mining Ltd [ASX:EVN] and Newcrest Mining Ltd [ASX:NCM] were also down by 5.20%, 4.78%, 3.82%, 3.25% and 3.06% respectively.

Why the Share Price Drop?

As predicted, the Fed decided to maintain the interest rates on hold at 1%–1.25%. Yet, even without inflation picking up, the Fed is expected to introduce another rate hike by the end of the year.

The Fed also announced it will be starting to unwind its US$4.5 trillion balance sheet in October. That is, they will be ending the stimulus they started during the 2008 financial crisis. They will be doing so very slowly, at US$10 billion per month.

Following the announcement, the Dow Jones and the S&P went on to reach new highs.

Gold fell after the Fed generated optimism on future rate hikes, as a stronger dollar would mean lower gold prices.

What now for Gold Miners?

The US Fed has a tough job ahead. The Fed has increased their balance sheet by five times since 2008 when it was at around US$900 billion.

With persistent low inflation, salary growth and world debt at record highs we are yet to see if the expected rate hikes will happen.

PS: If you want to find out what are Australia´s top 10 mining stocks right now, click here.

Selva Freigedo,

For Money Morning

Selva Freigedo is an analyst at Money Morning. She has a background in financial economics, but what makes Selva´s experiences different to many are the places she has lived and worked. Born in Argentina, she has also lived in Brazil, the US, Spain, and now Australia. She has seen up close many of the economic phenomena that worry Fat Tail Investment Research readers, like hyperinflation, bank bail-ins and governments burdened with so much debt it cannot possibly be repaid.

Every week, she goes through each article, research note and recommendation produced by our experts around the world to give you information on how to build and protect your wealth. Selva packages the week’s best ideas into one easy to read report: Port Phillip Insider Extra.

Money Morning Australia