Gold has its worst collapse since 2013. Investors sell off mining companies

Gold showed the strongest decline since April 2013, Bloomberg reports . The cost of metal on the spot market fell to $4082 per ounce, losing more than 6%.

Investors are also selling off silver - its price collapsed at the highest rate in 4.5 years, since February 2021. Silver fell in price by 8.7% to $47.9 per ounce.

Against this background, the value of the largest gold mining companies fell sharply: shares of Newmont collapsed by 9.4%, these securities became the worst in the S & P 500 on October 21, writes Barron's. Quotes of Barrick Mining fell by about 9%.

Shares of mining companies are traditionally considered stable and even a bit "sleepy" investments, the publication notes. Over the past five years, Newmont's beta coefficient - a measure of volatility compared to the market - has been 0.49, which means that the value of its securities fluctuates about twice as weakly. Agnico Eagle Mines has about the same, 0.47, and Barrick has a slightly higher beta of 0.51.

However, the rapid growth of prices for gold and shares of mining companies has noticeably changed the situation on Wall Street. Now gold miners react to the movement of precious metal prices in the same way as cryptocurrency companies react to bitcoin, Barron's believes. ETF SPDR S&P Metals & Mining lost 6.6% on October 21.

The precious metals market, which until this day was updating record after record, was hit by a combination of factors: positive signals in trade negotiations between China and the U.S., the strengthening dollar, uncertainty due to the prolonged shutdown of the U.S. government and the end of the seasonal period of gold buying in India for the Diwali holiday, explains Bloomberg. Another reason: the lack of data on investor positions in the futures market - the publication of reports was suspended due to the shutdown of the U.S. government, recalls FT.

"Current gold ETF investment volumes have not yet reached historic highs, previous rallies often lasted longer. But history shows that momentum fades over time, and in most cases buying is replaced by selling. If the delayed [due to the shutdown] data eventually shows that the economy is stronger than expected, a deeper correction in gold will not be long in coming," warned macro strategist Tatiana Darier.

"The market has started to overheat," MKS Pamp analyst Nikki Shiels told the FT. - The main reason is extremely overbought, the rally has reached a mature stage. The very fact that we (gold prices - Oninvest) are up $1,000 in six weeks suggests we are overvalued-we are already in the stratosphere."

"Gold has entered an unsustainable growth zone," Barron's quotes a note from analysts at Renaissance Macro Research. The bull market is making it increasingly difficult to pinpoint the moment to take profits, they explain: "When a reversal does occur, traditional trend following methods will likely prove too slow to protect capital."

This article was AI-translated and verified by a human editor