Mining stocks suffered on Tuesday morning due to the rising strength of the US Dollar.
The London Stock Exchange Mining Sector Index lost 382.18 points in morning trading on Tuesday. At 10.57am it stood at 11,508.26, down 3.21% from market close on Friday.
Diversified mining companies record losses
Diversified mining companies have seen share prices drop. BHP Billiton was down 2.87%, Anglo American dropped 2.53% and Rio Tinto lost 3.69% in the morning trading hours.
Gold and silver mining stocks down
Gold and silver mining companies Hochschild Mining, Acacia Mining and Avocet Mining lost 6.34%, 6.83% and as much as 11.49% respectively.
Prices of the precious metals surged in the first seven months of the year, due to low Fed rates and growing economic uncertainty. This helped mining companies, specialising in the extraction and handling of gold and silver, to record high earnings.
However, Friday’s speech by Fed chair Yanet Yellen increased expectations of a new Fed rate hike later on this year. This continuously strengthened the dollar over the past days and hit mining stocks.
The GBP/USD fell from 1.32599, before Yellen’s speech on Friday, to 1.30796 at 11.03am on Tuesday morning, down 1.4%.
A stronger USD hits mining companies.
As commodities are largely priced in USD, the strengthening of the currency leads to higher prices and lower demand. This lowers revenue expectations for miners, seeing mining stocks tumble.
While gold and silver miners seem to be most affected by the recent hit, more diversified miners have this year already suffered greatly due to lower prices for copper and nickel as China, the largest consumer of such metals, heavily reduced demand.
Katharina Fleiner 30/08/2016