The news: The mining sector slumped 3% on Friday, dragging the broader ASX 200 index down. Gold producers led the sell-off after bullion prices were on track for their biggest weekly loss since early June, pressured by a strengthening US dollar and fears the US Federal Reserve will keep interest rates higher for longer.
Gold miners including Northern Star (-4.1%), Evolution Mining (-4.5%), Newmont Corporation (-3.4%) and Greatland Resources (-5.7%) all plummeted at 2:09pm AEST.
The context: Gold edged higher to around USD3,980 an ounce ($5,701), but remained down 3.4% for the week as the US launched another wave of strikes on Iran overnight. This followed attacks the previous night that hit an oil tanker near Tehran’s main export terminal.
The stronger US dollar and higher Treasury bond yields weighed on bullion, which is priced in the greenback.
Meanwhile, a growing chorus of Federal Reserve officials has warned that inflation remains elevated, fuelling expectations the central bank may need to raise interest rates again, with higher rates typically weighing on non-yielding assets such as gold.
Bullion has traded in a narrow range around USD4,000 an ounce in recent weeks after slumping 14% in the second quarter, its worst quarterly performance since 2013, according to Bloomberg.
What they said: “The slight bounce on Friday may be a reflection of dip-buying, but it’s too soon to call a turnaround in the market,” Chinese Banking Corp strategist Christopher Wong said.
“Upside in gold requires oil prices to ease off further and hawkish rhetoric to dial down,” he added.