The Evolution Mining Ltd (ASX: EVN) share price hasn't been immune to today's sharp sell-off on the S&P/ASX 200 Index (ASX: XJO). But the gold miner is certainly holding up better than the benchmark.
In afternoon trade the Evolution Mining share price is down 1%. Meanwhile, the ASX 200 has tumbled more than twice that much, down 2.2%.
But it's not just Evolution Mining shares that are outperforming.
At the time of writing the Northern Star Resources Ltd (ASX: NST) share price has slipped 1.2% while shares in Newcrest Mining Ltd (ASX: NCM) are down 0.86%.
All up the S&P/ASX All Ordinaries Gold Index (ASX: XGD) is down 1% today, half the damage suffered by the ASX 200.
With the United States Fed having just bumped interest rates in the world's largest economy by another 0.75% and gold trading near two-year lows, what's supporting the Evolution Mining share price?
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Safe haven status in play
Gold is classically viewed as a safe-haven asset, alongside the US dollar and government bonds.
Yet, despite rising geopolitical tensions around China and Taiwan, alongside Russia's invasion of Ukraine, bullion has fallen from multi-year highs of US$2,051 per ounce on 8 March to US$1,671 today.
Much of that pressure has come from fast rising interest rates. Not just from the US Fed, but from central banks across the world, including the RBA.
That's pushed down bullion prices, and pressured the Evolution Mining share price, on several fronts. Mainly, gold doesn't pay any interest. And as rates go up, so too does the allure of alternate haven assets like the US dollar and government bonds.
But an interesting thing happened in the wake of Wednesday's rate hike by the Fed. While gold dipped initially, bullion is currently just $2 per ounce below where it was before the rate announcement.
Commenting on the outlook for gold, and by extension the share prices of gold stocks like Evolution Mining, Ed Moya, senior market analyst at Oanda said (quoted by Bloomberg):
Gold is clearly going to become a safe haven as the global outlook deteriorates and as Wall Street grows confident that we are nearing the peak with Treasury yields … [with] massive support at the $1,660 level. And if it can stabilise above there, prices could eventually make a move back above the $1,700 level.
Indeed, with Russian president Vladimir Putin announcing the mobilisation of 300,000 reserve troops, and possibly more, tailwinds from gold's haven status may trump the headwinds from rising interest rates.
Evolution Mining share price snapshot
Though it's outperformed the benchmark today, the Evolution Mining share price has been hammered in 2022, down 51%. That compares to a 12% year-to-date loss posted by the ASX 200 and a 31% loss on the ASX gold index.
