Skip to Content
Stock Strategist

More Room for Gold Miners to Fall

We continue to believe consumer demand means gold has a promising future, but there is still downside risk for the commodity and the miners in the near term.

Mentioned: , , ,

Gold has remained relatively steady in the low- to mid-$1,300 per ounce range over the past few months, holding onto the massive gains from earlier this year. However, through mid-afternoon Oct. 4, gold has fallen more than 3% to roughly $1,270 per ounce as the U.S. Federal Reserve looks likely to raise rates by the end of 2016. As a result, gold miner stocks have fallen by roughly 10% or more.

Based on Fed Fund futures prices, the market is currently pricing in 55% probability of one rate hike and 8% probability of two rate hikes by the end of 2016. The market currently prices in 37% probability of no rate hikes through the end of the year, compared with roughly 60% just a couple of months ago. In addition, the latest Federal Open Market Committee "dot plot" shows most participants currently expect at least one rate increase by the end of 2016 and two hikes in 2017.

Kristoffer Inton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.