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In the post-COVID-19 world, it’s almost definitely news to nobody reading this that gold prices have staged a fairly historic run. But the surefire bet that gold = safe haven = gains is now, sadly, outdated after ~2.5 years.
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Climbing +66% in CY25 – on top of a year-long double-digit rally in CY24, itself historically significant too – it looks like, triggered mainly by the Iran War and conflicts in the Middle East, the ceiling has finally come in.
Or at least, there’s nerves. For the last three weeks (ish), the Iran War has already sucked some life out of gold, which I feel has a lot to do with the fact that oil has become a “meme trade” – as I discussed with my editor, Isaac McIntyre, on the HotCopper Wire podcast this week – and now there’s fresh pressure.
That pressure comes in the form of a hawkish Fed with a rate hike for the U.S. now a more pronounced possibility than it was last week, which has helped to reiterate what had already been a renewed strengthening of the USD.
Those two things together have added to geopolitical volatility; a large part of the gold run over the last two years hasn’t been borne from the decisions of individual investors but the central banks of other nations.
Except, now, it’s obvious that the stocks which have benefited from gold’s meteoric rise in recent history now stand as the most obvious targets for investors to trim as the gold price dips below its psychologically impactful US$5k/oz level.
Talking of psychologically impactful numbers, good time to point out that as of 12.30pm AEDT, gold’s down over -10% across the last month.
Not surprisingly, then, gold stocks have peppered the daily biggest fallers boards across the last fortnight. At the time of writing, New Murchison Gold continues to bleed; also notable was that popular junior West Wits Mining minted its first pour this week, and the market largely shrugged.
While West Wits might have aspects to its value proposition that could be a legitimate cause for scrutiny, a first gold pour is typically received well by ASX investors who might have gotten used to buying first and asking questions later in the last 24 months. That might be about to change.
Also notable, the Global X Physical Gold ETF is down -9% over the last week; the U.S.-heavy SPDR Gold Shares ETF is down -7% over the last month (in line with the former on that 1mth metric), and I could keep naming ETFs but you get the idea.
Long story short: The safe haven thematic is taking a blow, and investors will need to readjust. That readjustment period probably lasts for as long as it takes for this Iran War to end, or transition to some other phase.
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