Why gold stocks plunged today – Ramelius, Spartan and Evolution Mining drop more than 10%
The VanEck Gold Miners ETF fell 7% on Wednesday, its worst single-day dip since March 2020. Here's why.
Source: iStock
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KEY POINTS
- Gold stocks, including Ramelius, Spartan Resources, and Evolution Mining, dropped over 10% due to a 4% intraday gold price slide from Tuesday’s high of US$3,500 to Wednesday morning
- The VanEck Gold Miners ETF (ASX: GDX) fell 7%, its worst single-day loss since March 2020, reflecting broad selling pressure across Australian gold miners
- Overbought conditions, like Evolution Mining’s 37% rally in nine sessions, made stocks vulnerable to profit-taking amid the gold price pullback
Gold investors are likely scratching their heads today, wondering why gold stocks are tanking so dramatically. Local gold miners opened 3-5% lower but faced relentless selling pressure throughout the session, with many closing at session lows and suffering double-digit losses.
The steep declines are surprising given that gold prices fell just 1.3% overnight and broader equity markets posted a relatively strong session.
More broadly speaking, the VanEck Gold Miners ETF (ASX: GDX) plummeted 7%, marking its worst single-day performance since March 2020 and, before that, November 2016.
A Sea of Red for Gold Miners
Here’s a snapshot of the carnage at 3:40 pm AEDT:
Ticker | Company | 1-Day |
|---|---|---|
Ora Banda Mining | -15.3% | |
Ramelius Resources | -14.6% | |
Spartan Resources | -13.1% | |
Vault Minerals | -11.7% | |
Capricorn Metals | -11.1% | |
Genesis Minerals | -10.7% | |
Emerald Resources | -10.5% | |
Evolution Mining | -10.4% | |
West African Resources | -9.9% | |
Regis Resources | -9.8% | |
De Grey Mining | -9.0% | |
Northern Star | -9.0% | |
Perseus Mining | -7.9% | |
Westgold Resources | -7.8% | |
Gold Road Resources | -6.7% | |
Newmont | -6.0% | |
Catalyst Metals | -5.3% |
Share price performance as at 3:40 pm AEDT
Didn’t Gold Prices Hold Up?
At first glance, gold prices seemed relatively stable, easing 1.3% on Tuesday to US$3,379 per ounce. However, this figure masks intraday volatility. During Tuesday’s session, gold rallied as much as 2.2% to US$3,500 — an intraday high that coincided with the Australian market close, when local gold miners were priced at their most optimistic levels.
Gold intraday price chart (Source: TradingView)
From that session high to 10:00 am Wednesday, gold prices slid approximately 4% and continued to decline during market hours. This created a mismatch: local gold miners closed Tuesday on a high note, but the overnight drop in gold prices triggered today’s aggressive sell-off.
Overbought Stocks and Valuation Concerns
The sharp decline in gold stocks also reflects overbought conditions and stretched valuations. Take Evolution Mining, for example. The stock surged 4.9% on Tuesday to a record high, capping a 37% rally in just nine sessions. Such a rapid climb left it vulnerable to a pullback, especially with any softening in gold prices.
Analysts are also expressing concern about valuations, contributing to the sell-off. Many gold stocks, despite strong operational performance, are being downgraded due to lofty valuations. Genesis Minerals is a case in point.
The company’s March quarter results exceeded expectations, producing 59,800 ounces — 10% above Macquarie’s forecasts — thanks to better-than-expected grades and recoveries. Analysts praised the result, noting "the third quarter result was a positive with Genesis Minerals delivering ahead of expectations once again, firming up potential to beat its 10-year outlook." Yet, Macquarie downgraded the stock to Neutral, citing its ~80% year-to-date share price surge, which leaves the stock fully valued.
The Bottom Line
Today’s plunge in gold stocks stems from multiple factors: an overnight drop in gold prices that hit local miners after their bullish close, overbought conditions prompting profit-taking, and valuation concerns driving analyst downgrades. While gold prices remain high, the mismatch between Tuesday’s optimism and Wednesday’s reality has triggered a brutal sell-off, highlighting the volatility of gold stocks after sharp rallies.
