Gold shares like Agnico Eagle Mines Ltd. (NYSE:AEM) and Newmont Corp. (NYSE:NEM) are falling Thursday as gold slides to a one-year low on fading Middle East peace hopes.
- Newmont stock is showing notable weakness. Why is NEM stock dropping?
Gold Slumps on Iran Standoff
Thursday’s 3% slide left spot gold prices near $3,868 an ounce, and December futures dropped 3.2%, Reuters reported.
U.S. President Donald Trump argued Washington has no reason to strike a deal with Iran, adding that “those days had long since passed,” so hopes of ending a war that began in February’s final weeks faded.
How Oil, Inflation and Rates Pressure Gold
Oil sets off the chain. When peace hopes fade, crude climbs and inflation worries build. Traders then expect the Federal Reserve to keep rates high for longer, and markets now see a 91% probability of a quarter-point December hike, with a half-point move gaining odds as well. Because bullion pays no interest, higher rates strengthen the case for bonds and cash instead.
The dollar adds a second layer of pressure. Gold is priced in dollars, so when the dollar strengthens, buyers abroad need more of their own currency to buy the same ounce. That can weaken demand and push the price lower. Expectations of Fed rate hikes can support the dollar, and the dollar index recently touched its highest level in almost 19 months.
American Gold Exchange analyst Jim Wyckoff pointed to Tuesday’s hot consumer price data, hawkish comments by Fed policymakers and the dollar’s rally. Those forces “are working to press the gold market lower,” Wyckoff said. Wyckoff also called an oil spike bearish for gold because of its inflation effect.
Traders now wait for Friday’s producer price index for fresh insight into both monetary policy and the inflation report.
Gold Shares Are Sliding
Price Action: Newmont shares were down 3.26% at $114.61, and Agnico Eagle shares were down 2.70% at $180.93 at the time of publication on Thursday, according to Benzinga Pro.
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