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How the price of the VanEck Gold Miners ETF compares to the gold spot price through 2026 so far.<\/p>\n
The outlook for miners has changed significantly over the past couple of weeks, with market volatility squeezing margins at both ends.\u00a0<\/p>\n
“It is interesting to see resources sector reactions on both an energy supply shock and geopolitical risk event,” said Rob Stein, head of resources research at Macquarie Capital.<\/p>\n
“The combination of the two with increased uncertainty is potentially driving change at the asset allocation level, with the recent rally a base to take profit, especially in the smaller end of the market.”<\/p>\n
Russ Mould, investment director at AJ Bell, added that higher energy costs are a “genuine threat” to gold miners’ margins.\u00a0<\/p>\n
“We saw this in 2006-07, as overall production costs rose sharply,” he added.<\/p>\n
While gold bullion is a pure commodities play, miners bring additional equity risk that leaves them sensitive to an increasingly volatile macroeconomic environment.<\/p>\n
“Miners are heavily exposed to economic shocks, which explains why investors are pulling back in this area,” said Michael Field, chief equity strategist at Morningstar.<\/p>\n
“Unless risk sentiment improves and confidence in global growth is restored, it’s unlikely that miners will resume their bullish path.”<\/p>\n
Field added that there’s also an element of investors taking gains and selling their best-performing assets of recent years to raise cash.\u00a0<\/p>\n
The retreat from gold \u2014 which is traditionally seen as a key safe-haven asset in times of market turmoil \u2014 chimes with the ongoing risk-off sentiment<\/a> in markets as the Iran conflict fuels concerns over inflation and rising energy prices.<\/p>\n The prospect of higher interest rates as a result of the war could boost government bonds among investors, at the expense of non-yielding precious metals, market strategists told CNBC<\/a> recently.<\/p>\n