A host of Australian gold producers have made considerable loses this morning after a day of strong gains yesterday. One of yesterday’s top performers, Northern Star Resources Ltd [ASX:NST], is down 3.55% to $8.43, from $8.73 at close yesterday.
Northern Star isn’t the only star performer from yesterday’s gold boom to take a hit this morning. St Barbara Ltd [ASX:SBM], Newcrest Mining Ltd [ASX:NCM], and Saracen Mineral Holdings Ltd [ASX:SAR] have all moved backwards this morning.
While today’s slide hasn’t completely wiped out advances made yesterday, it does reveal just how exposed share prices of Australian gold producers are to global events.
Who is to blame for the loss?
As it was for yesterday, it appears the turmoil in Italy is to blame. Gold prices moved backwards overnight by US$7.50 per ounce to US$1200 after Italy suggested it was open to lowering deficit targets.
Italy’s coalition government agreed to the compromise after intense EU criticism, agreeing to cut the deficit by 2.4%. The easing of tensions sees a soothing of nerves prompting investors to move back into riskier assets.
Gold is often used as an alternative during times of political uncertainty. Peter Fertig, an analyst at Quantitative Commodity Research, says the situation appears to be calming down…
‘The situation is calming down a little bit. It’s a little bit of a move into riskier assets in the euro zone that is slightly dampening gold’.
What now for our gold producers?
If Italy can continue to agree on its deficit goal it is unlikely it will be the cause of another gold-buying frenzy.
Fertig doesn’t except the gold price to jump again anytime soon. Gold prices have fallen for the past six months and experts say they expect this trend to continue…
‘Unless there is a meltdown in Italy or a financial crisis…there is no strong reason for a jump in gold prices. I expect more sideways trading around the present levels with plus or minus around $20’.
However, this doesn’t necessarily mean Australian gold producers will suffer.
Currently, Australia is the second largest producer in the world, with some tipping that production will hit record highs this year.
Aussies miners have experienced high margins in recent years as a stream of new projects have come online. Seemingly, this recent slump in price hasn’t been felt by producers yet.
For Money Morning