The falling price of gold pushed bullion producers’ stocks to double-digit losses Monday, further hurting a sector that has cut costs, trimmed production and sold assets to win back investors.
On Monday, gold fell 3.1% at $1,096.60 an ounce, a 41% decline from its peak in September 2011. Analysts say that any price below $1,100 an ounce will really sting, as that is the break-even cost for many miners.
Since the price of gold started falling in the autumn of 2011, miners have slashed exploration and capital spending significantly, and many have moved to sell less-profitable assets to raise cash.
That means producers “really don’t have a whole lot of options available to them in this environment,” said Ron Stewart, an analyst at Macquarie Capital Markets Canada Ltd. “The low-cost operators will survive…. The higher cost miners will be financially stressed by this,” Mr. Stewart said.
Gold has been weighed down by lower-than-expected demand in China and a rise in the U.S. dollar amid expectations of higher U.S. interest rates. Like many commodities, it is priced in dollars, making it more expensive for overseas buyers when the greenback gains in value.
On Monday, some of the biggest names in gold mining sustained some their steepest one-day declines in years. Barrick Gold Corp. tumbled 15.7%, Newmont Mining dropped 12.2% andGoldcorp Inc. fell 12.3%.
As measured by the Market Vectors Gold Miners Index, the gold sector index has fallen 23% year to date and is down almost 40% from this year’s high in late January.