How interest rates impact Australian gold mining stocks
Stock Analysis & Ideas

How interest rates impact Australian gold mining stocks

Story Highlights

The gold price has fluctuated sharply in 2022, shooting up upon the Ukraine conflict, but falling amid interest rate rises. Despite the volatility, TipRanks insights show these Australian gold mining stocks are worth some attention.

Global gold prices have a major impact on the value of Australian gold miners, such as Newcrest Mining Limited (NCM) and Northern Star Resources Limited (NST).

Gold prices shot up above $US2,000 in March, soon after Russia invaded Ukraine. Investors sought shelter in the precious metal amid concerns over geo-political economic risks.

However, gold prices have eased since then, declining about 15% from the early year peak, to about $US1,700.

The relationship between gold & interest rates

There exists an inverse relationship between interest rates and gold prices.

When interest rates are low, investors tend to park more funds in the precious metal. Conversely, when they rise, investors tend to be attracted to government bonds and stocks, which offer increased returns.

The successive interest rate hikes across the globe in recent months help explain the decline in gold prices.

Australia mining stocks move alongside gold price

Gold prices edged up this week, but the precious metal is expected to remain volatile in the months ahead.

Newcrest Mining and Northern Star Resources shares have dropped alongside the gold price in 2022. However, the stocks have responded to recent gains in the gold price.

While NCM stock is still down about 30% year-to-date, it has gained about 2.5% over the past five days. Meanwhile, NST stock has climbed almost 2% over the same period, but is still down around 20% since the start of the year.

Newcrest Mining stock price prediction

Newcrest Mining is the largest Australian gold mining company by market cap. In addition to Australia, Newcrest also has mining operations in Indonesia and Papua New Guinea. According to TipRanks’ analyst rating consensus, NCM stock is a Moderate Buy based on five Buys and eight Holds. The average Newcrest Mining price target of $AU24.26 implies over 42% upside potential.

Northern Star Resources stock price prediction

Northern Star Resources is a leading Australian gold producer. It has five active mines that are producing large amounts of high-quality gold. According to TipRanks’ analyst rating consensus, NST stock is a Strong Buy based on 12 Buys. The average Northern Star Resources stock price prediction of $AU10.92 implies over 46% upside potential.

Moreover, Northern Star scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations

Final thoughts

Although high interest rates are turning investors to bonds and bank stocks, gold may continue to notch up small gains.

For example, a rush to buy the dip in the yellow metal, as well as demand for safe haven assets among investors worried about a recession, could provide some upward support for gold prices.



Price Change
S&P 500
Dow Jones
Nasdaq 100

Popular Articles