On a day when tech stocks tumbled as measured by the Technology Select Sector SPDR ETF (NYSE:XLK), Newmont Corp. (NYSE:NEM), a gold mining company, witnessed a notable increase of 12.5%. This marks Newmont’s biggest one-day rally post-pandemic. The increase was driven by first-quarter earnings that significantly exceeded expectations.
The contrast in performance between the technology sector and the gold mining industry this week reflects a broader trend observed in recent months. That said, the tech industry, known for its rapid growth and innovation, has encountered challenges like market volatility and regulatory scrutiny. Meanwhile, traditional sectors like gold mining have gained traction among investors seeking stability and protection against economic uncertainties.
Newmont’s Golden Quarter
Newmont, a standout among gold miners, has emerged as a strong performer, showcasing both stability and impressive growth.
The company reported a 38% year-over-year increase in earnings per share to $0.55, exceeding analyst expectations. Revenue also surged by 50% compared to the same quarter in 2023, reaching $4.02 billion. These unexpected results were further bolstered by the company’s operational efficiency. Newmont’s Costs Applicable to Sales (CAS) per ounce of gold came in at a low of $1,057, significantly below the average realized gold price of $2,090 per ounce.
Newmont’s CEO, Tom Palmer, emphasized the company’s strong operational metrics and the company’s substantial cash generation. This cemented investor confidence in the gold mining industry and sparked a significant rally in the sector.
The TipRanks Stock Price & Analysis for Newmont Mining (NEM) indicates a 27.90% gain over the past three months.
The Technology Sector Takes a Hit
In stark contrast to the golden glow emanating from the mining sector, the technology industry has faced a period of significant turbulence. For example, Meta Platforms Inc. (NASDAQ:META), parent of Facebook, witnessed a 15% stock decline following the release of a disappointing revenue outlook for the coming quarter.
Meta’s rough day wasn’t an isolated event; it reflected a broader downturn in tech stocks, which has already wiped out over $200 billion in market value from the so-called “Magnificent 7” tech giants this week.
The TipRanks Stock Price & Analysis for the Technology Select Sector SPDR ETF (XLK) indicates a 2.13% loss over the past three months, well off its highs.
Investors Pivot on Economic News
The recent U.S. economic slowdown added fuel to the fire of investor anxiety. The markets have reacted poorly to Bureau of Labor Statistics figures that reveal a slower-than-expected annualized growth rate of 1.6% in the first quarter of 2024, a significant drop from the previous quarter’s 3.4% expansion.
To frighten the market even more, economic deceleration coincided with an acceleration in inflation. The headline Personal Consumption Expenditure (PCE) price index jumped to 3.4%, with the core PCE price index reaching 3.7%. The rising inflation figures reignited concerns about future Federal Reserve actions, leading to a surge in Two-Treasury yields above 5%.
Key Takeaway
The perfect storm of a slowing economy, rising inflation, and waning hope of a potential Federal Reserve rate cut have made gold an increasingly attractive asset class for investors seeking a hedge against these uncertainties. Gold’s historical reputation as a safe-haven asset, combined with Newmont’s impressive financial performance, has helped fuel investor confidence in the overall gold mining industry.
