Why gold stocks plunged today – Ramelius, Spartan and Evolution Mining drop more than 10%

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:

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.