Shares of Newcrest Mining Limited (ASX: NCM) have been hammered this week as the gold price has continued its rapid descent.
As highlighted by the Fairfax press, the precious metal has endured its worst run since 1996, falling in each of the last 10 sessions for a total loss of 6.2%. It was down another 0.7% overnight at US$1,094.20 an ounce, after hitting a new five-year low on Monday at US$1,080.
The problem is, it's expected to fall even further in the near future. Indeed, the US Federal Reserve is almost certain to begin hiking interest rates this year – possibly as soon as September – which will act to strengthen the US currency (a stronger US dollar has traditionally acted as a drag on gold prices), while a major sell-off of the bullion in China earlier in the week causing a 'flash crash' has also weighed on the market's sentiment.
So much for being a 'safe haven'!
Gold hasn't traded below US$1,000 an ounce since 2009, but it could well be on the way to breaking that trend before the year is out with the bear case for the metal strengthening every day.
Newcrest is Australia's largest gold producer and is thus one of the nation's lowest cost producers, as well. Unfortunately, that hasn't allowed the company to avoid the carnage that has ripped through the gold sector this week with its shares plummeting 12.7% since Monday.
Newcrest's fall is mostly in line with the declines endured by rivals such as St Barbara Ltd (ASX: SBM), Northern Star Resources Ltd (ASX: NST) and EVOLUTION FPO (ASX: EVN), which have also fallen between 8% and 12%, while the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD), which tracks Australia's gold producers, is down a whopping 12.1%.
That compares to a 1% decline for the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the same time.
It is clear that gold has lost its appeal amongst global investors, and for good reason. As the price of gold has plummeted in recent years, sharemarkets around the world have skyrocketed, generating enormous returns for investors who positioned their portfolios accordingly.
Unfortunately, the producers themselves are completely at the mercy of the metal's price swings and with further falls expected, the gold miners are not the best place to position your money today.
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