Why did the Northern Star share price tumble 24% in June?

We take a closer look at what drove down Northern Star shares last month.

| More on:
A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Northern Star shares backtracked 24% last month due to unfavourable market conditions 
  • Interest rake hikes and low confidence among consumers dragged down the price of gold to the psychological barrier of US$1,800 an ounce 
  • The largest fall in the month for the gold miner's shares came from a disappointing trading update from fellow peer, Evolution Mining 

The Northern Star Resources Ltd (ASX: NST) share price continued to tread lower throughout the month of June.

From market close of $8.95 on May 31 to finishing $6.84 on June 30, this represents a decrease of 24%.

Despite the steep drop, this represents yet another month of strong volatility which has impacted the gold miner's shares since COVID-19.

At market close on Monday, Northern Star shares have since slightly recovered to finish trading 3.67% higher to $7.06.

What's happened to the Northern Star share price?

A number of macro environmental factors led the Northern Star share price to sink last month.

The move by major central banks to increase interest rates to lower inflation sparked worries about a potential economic downturn. This ultimately had a negative effect on the gold price as investors shifted their money away from the safe-haven metal.

When interest rates rise, government bonds also increase providing a much more attractive option for investors.

Subsequently, the price of the yellow metal declined almost 2% over the period to hover just above US$1,800 per ounce.

However, the biggest fall in the month came on 27 June with Northern Star shares losing more than 12%.

While no announcements were made by the company, a bearish business update by fellow miner, Evolution Mining Ltd (ASX: EVN) caused the dip.

Furthermore, a report stating that consumer confidence plummeted to a 16-month low in the United States exacerbated market fears.

The release came overnight on June 28, with Northern Star shares shedding almost 10% in the following 3 days.

It is worth noting that with consumer spending habits affected due to the macroenvironmental trends, demand for gold will wane.

This is particularly important because jewellery accounts for the largest slice of global gold demand at about 50%. Next up, central bank reserves account for 25%, individuals at 15% and industrial uses at 10%.

If more aggressive interest rates are followed, this will ultimately drive consumers away from discretionary purchases such as gold.

In effect, lower demand for the previous metal leads to lower prices for gold which in turn affects Northern Star earnings.

What do the brokers think?

Late last month, a couple of brokers weighed in on their thoughts regarding the Northern Star share price.

According to ANZ Share Investing, Citi cuts its price target by 4.1% to $11.60 for the gold miner's shares.

This was then followed by JPMorgan also reducing its rating by 14% to $9 a pop.

Based on today closing's price, this represents an upside of 64% and 27%, respectively.

Both brokers believe that Northern Star shares are significantly undervalued given the current economic environment.

Motley Fool contributor Aaron Teboneras has positions in Northern Star Resources Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Gold

Woman with gold nuggets on her hand.
Gold

Experts reveal 4 ASX gold shares with more than 30% upside potential in FY26

Think the ASX gold rush is over? Think again. Experts say these stocks have more share price growth ahead.

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

Guess which ASX All Ords gold stock is marching higher on some 'very positive news'

The ASX All Ords gold stock has been actively drilling in Papua New Guinea.

Read more »

Miner looking at a tablet.
Gold

Northern Star share price drops 29% from its 2025 peak. What next?

It's been a rollercoaster ride for the gold producer's share price in 2025.

Read more »

Red arrow on gold bars going down.
Gold

Why Evolution Mining, Newmont shares are tumbling today

The ASX 200 Index is also in the red.

Read more »

Miner with thumbs up at mine
Gold

Up 78% in a year, what's Macquarie's price target for Gold Road shares now?

Can Gold Road shares keep rocketing higher into 2026? We look at Macquarie’s latest forecast.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Gold

Up 63% in a year, why is this ASX 200 gold share tumbling today?

Investors are bidding down this high performing ASX 200 gold miner today. But why?

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Gold

This ASX gold stock is sinking 6% despite acquisition news

Weakness in the gold sector is offsetting this news.

Read more »

A woman stands in a field and raises her arms to welcome a golden sunset.
Gold

Why the stellar bull run for ASX 200 gold stocks may only just be getting started

Some ASX 200 gold stocks have more than doubled investors’ money in a year. And that could be just the…

Read more »