Gold price drop sinks mining stocks - MINING.com

Gold price drop sinks mining stocks - MINING.com

Gold struggled on Wednesday losing more than 1% to exchange hands for $1,328.10 in midday trade in New York. Gold is coming off two-year highs hit early this month and year to date the metal is still up more than 25% or nearly $270 an ounce.

Some of the biggest drivers of 2016 gold price surge have begun to lose steam in recent weeks. Large scale gold futures and options speculators or "managed money" investors such as hedge funds have been scaling back bullish bets recently and the frenzied buying of physically-backed gold ETFs have also moderated (see graph).

Investment flows have started to flash warning signals which could indicate that gold, just like in May, could be facing another correction

Hansen, chief commodity strategist at Saxo Bank, says while the fundamental drivers still support a higher gold price, but these investment flows have started to flash warning signals which "could indicate that gold, just like in May, could be facing another correction."

The caution about the outlook for the  price was evident among gold mining stocks on Wednesday with heavy selling across the board.

Barrick Gold Corp (NYSE:ABX, TSE:ABX) fell 6.9% with more than 15 million shares changing hands in early afternoon dealings pushing the shares to its lowest level since the beginning of June. At a market value of $21.46 billion in New York, the Toronto-based company has now lost its status as the most valuable gold mining company in the world.

World number two in terms of production Newmont Mining Corp (NYSE:NEM) shed 5.2% in afternoon trade. Denver-based Newmont, the only gold company that forms part of the S&P500 index, like Barrick has more than doubled in value in 2016 and is set to end the day as the gold mining company with the top market capitalization in New York at $21.68 billion.

While Barrick has been disposing of mines and putting others on the block, including its Kalgoorlie Super Pit joint venture with Newmont in Australia, the US company is building its portfolio and last year acquired the Cripple Creek & Victor gold mine in Colorado. Newmont also has five key projects that are in execution stage including the Turf Vent project in Nevada and Merian mine in South America. The company's expansion drive would lift annual production above 5 million ounces and could see it overtake Barrick in terms of output as early as next year.

Goldcorp (TSE:G, NYSE:GG) was one of the biggest losers on the day falling 7.7%  for market capitalization of $13.7 billion in New York. The year-to-date increase for the Vancouver-based firm which recently saw a top management overhaul is more modest than its peers at 41%. Goldcorp recently lowered its production forecast for to 2.8 – 3.1 million ounces from 2016 to 2018 from about 3.5 million ounces in 2015 driven by production declines at older mines.

Other Canadian gold miners also succumbed to the negativity. Toronto's Kinross Gold (TSE:K, NYSE:KGC) fell 7.7% to dip below the $7 billion market worth. Agnico Eagle Mines (TSE:AEM, NYSE:AEM) market capitalization fell 5.4% to $11.8 billion in New York. Yamana Gold (TSE:YRI, NYSE:AUY) was another big loser on the day, dropping 7% for a market value of $5.5 billion in New York while Eldorado Gold Corp (TSE:ELD, NYSE:EGO) declined 6.5% and is now valued at $2.5 billion.

The  drop in the American Depository Receipts of AngloGold Ashanti (NYSE:AU), the world's third largest gold producer in terms of output, were more modest at 2% for a market value of $7.2 billion on the NYSE, but the counter is down more than 8% over the past week. Other Africa-focused miners also didn't fare well either: ADRs of Gold Fields (NYSE:GFI) lost 4.7%, its South African peer Sibanye Gold (NYSE:SBGL) fell 4.3% and Randgold Resources, dipped 4.4% and is now worth $9.4 billion.

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