Gold prices tumble, sending miners' stocks plunging
Toronto-Canada (July 20) Bullion plunged to its weakest price in five years on Monday as the specter of higher US interest rates led investors to sell the precious metal in favour of U.S. bonds.
The drop to $1,105 an ounce (US) is decimating shares of Canadian gold companies in trading Monday.
Barrick Gold Corp., the world’s biggest gold producer, dropped about 12 per cent at mid-day to as low as $10.22 (Canadian) in Toronto, a price not seen since 1990.
Goldcorp Inc., the world’s biggest gold miner by market capitalization, slumped to a decade low of $17.48. Eldorado Gold Corp. also fell to a decade low of $4.26.
A handful of Canadian-based producers sank to record lows, including Iamgold Inc. at $1.75 and Yamana Gold Inc. at $2.80.
Rock-bottom U.S. interest rates, combined with the U.S. Federal Reserve’s stimulus program known as quantitative easing drove gold to a record high of $1,921 in September, 2011.
But with Fed chair Janet Yellen increasingly bullish on the U.S. economy, investors are anticipating a rate hike in the near future. This will make it more profitable for investors to make money on interest-bearing assets such as U.S. bonds.
Investors are “selling gold for a better yield elsewhere,” said Robin Bhar, head of metals research at Societe Generale.
Gold has now lost 40 per cent of its value since 2011.