Since gold reached a record high of more than $2,000 per ounce a year ago, it is down 14%
London-listed gold miners have made substantial losses in their market value so far this year as the US dollar is approaching new highs.
Year-to-date, a number of the UK’s best known gold miners, including Shanta Gold (-26.14%), Greatland Gold (-54.7%) and Centamin (-26.93%), have posted disappointing results.
Since it reached a record of more than $2,000 per ounce a year ago, the precious metal has given away 14%.
There are a number of macro factors at play when speculating on why gold has failed to perform. Firstly, the strength of the dollar puts off international buyers for cost reasons. Second, bond yields are higher than they were last year. Thirdly, gold offers no passive income stream. Finally, the stock market has been booming.
“People are afraid of higher rates,” Robert Minter, director of investment strategy at Aberdeen Standard Investments, told the Financial Times. “This is ‘sell everything, throw the baby out with the bathwater’. Gold is going to be a constant opportunity for us any time it drops like this.”
Investors are increasingly voicing their concerns around inflation, while gold is historically seen as a hedge against it.
This caused Palantir, the data mining company co-founded by technologist Peter Thiel, to buy $50m in gold bars in response to what is deems to be an uncertain economic outlook, combined with a lack of desire to keep money stored in cash.
“During August 2021, the Company purchased $50.7 million in 100-ounce gold bars,” Palantir said in the Aug. 12 earnings statement for its fiscal second quarter. “Such purchase will initially be kept in a secure third-party facility located in the northeastern United States and the Company is able to take physical possession of the gold bars stored at the facility at any time with reasonable notice.”
As economies continue to recover across the world, supported to varying degree by government policies, gold may soon be tested for its ability to store value during hard times.
London-listed gold miners may stand to do very well or see their fate sealed as the world becomes more digital.