Newmont Corporation (NYSE: NEM) stock declined 3.2% through 11:30 a.m. ET Wednesday as gold prices took another turn for the worse. This morning, the U.S. Bureau of Labor Statistics reported the Consumer Price Index (CPI) rose 2.4% for a second straight month in February.
These two things are connected.
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There’s war in the Mideast, and it doesn’t look likely to end soon. War is generally considered “good” for gold prices; investors view it as a safe haven in times of conflict. Gold prices soared 2.6% in the immediate aftermath of the attacks on Iran.
Problem is, war can also be inflationary, especially this particular one, which is crimping global oil supply and driving up fuel prices. Although CPI held steady (albeit steadily above the Fed’s 2% inflation target) the past two months, the worry is that when March data arrives, it will show a big increase in inflation.
Inflation can incentivize investors to sell gold (which doesn’t pay interest) and buy bonds instead (which do pay interest, and increasingly more interest as inflation rises). In a nutshell, this is why gold prices are down 1.2% to $5,178 per ounce today — and why silver prices are down 5.1% to $85 an ounce.
Newmont, of course, mines both gold and silver — and copper, lead, and zinc besides. When the company’s stock in trade goes down in price, it makes sense Newmont’s stock would also fall short term.
Longer term, investors need to recall that Newmont stock costs less than 19 times trailing earnings, and only 16 times forward earnings. Analysts see earnings continuing to climb for Newmont, with 2029 profits more than twice what Newmont earned last year.
Newmont stock looks like a buy to me.
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