Almost every major global stock market index is in…or about to fall into…a bear market. That’s defined as a drop of 20% or more from recent highs.
Australia. Asia. Europe. The Americas. The boards are lit up in red, showing monthly losses between 20–25%. With more pain likely to come.
Only a few assets, like precious metals, have weathered this storm.
Gold, for example, has again proven to be worth its weight in…well…gold in times of rocketing uncertainty.
As The Rum Rebellion Greg Canavan wrote this morning:
‘Gold has been a pillar of strength throughout this panic phase. It’s performed its role as a protector of wealth in times of global uncertainty and turmoil.
‘Physical gold is pure wealth. It is one of the few ways you can get your “money” out of the financial system and store your wealth securely.
‘This is what makes gold so valuable in times of crisis, panic, and uncertainty. That is, it is not a part of the financial system.’
Indeed, gold is up 5.0% in US dollars over the past month. And thanks to our falling currency, gold is up 9.1% in Aussie dollars.
This while the ASX 200 is down 24.7% in that same time.
Little wonder then that gold is trading at record levels.
As Bloomberg reports, ‘Gold trading tracked by the London Bullion Market Association’s LBMA-i service reached almost $100 billion on Monday, the highest-ever daily volume….’
A rising gold price is, of course, great news for gold miners. And indeed gold stocks have largely outperformed the market over the past month. Though many have still lost ground.
Broad stroke, you can blame the wider market turmoil and panic selling for that.
But there are also company specific reasons.
Newcrest Mining Limited [ASX:NCM] is down 9.8% today in intraday trading.
The Sydney Morning Herald explains:
‘Newcrest, Australia’s largest gold miner, has cut its full-year gold production forecast after confronting difficult mining conditions at its Lihir mine in Papua New Guinea.’
The article notes the production woes have been ‘compounded by the underperformance of its Telfer mine in Western Australia’.
Gold stocks are risky. Even the bigger players like Newcrest. And in an emerging bear market, even gold stocks won’t be immune to bouts of panic selling as investors scramble for cash.
But with global uncertainty likely to grow for months yet before it eases, gold could remain in high demand. And the right gold stocks should be some of the biggest beneficiaries.