Gold Shares Plummet as Weekly Pullback Hits

The Australian share market experienced a significant pullback on Friday, ending the day down by 0.7%. This downturn erased earlier gains as investors reacted to concerns regarding future US interest rates. Speculation surrounding the possible nomination of Kevin Warsh, a former Federal Reserve governor, to lead the Fed fueled uncertainty. Warsh is perceived as more hawkish, raising fears of delayed interest rate cuts, which adversely affected gold prices.

Impact of Warsh’s Speculation on Gold Prices

Gold shares took a severe hit during this trading session. As rumors about Warsh started circulating, gold bullion prices plummeted by 5%. The metal settled around USD 5,200 per ounce. This drop coincided with a stronger US dollar, further straining the gold market.

Australian Stock Exchange Performance

The ASX 200 index saw a sharp decline, dropping 58.4 points to close at 8,869.1 points, down from an earlier high of 8,971.6 points. Despite the day’s losses, the index remains up 1.8% for January and up 0.1% for the week.

• Gold shares were particularly affected, with several companies reporting steep declines:
• Ora Banda (ASX: OBM) – down 11.7% to AUD 1.28
• Newmont (ASX: NEM) – down 7.9% to AUD 173.53
• Genesis Minerals (ASX: GMD) – down 9.9% to AUD 7.59
• Rio Tinto (ASX: RIO) – down 3.5% to AUD 151.55
• BHP (ASX: BHP) – down 1.8% to AUD 50.57

Sector Movements

Materials were the worst-performing sector, dropping more than 3%. Conversely, defensive sectors like healthcare experienced positive movement. The following companies showed notable gains:

• CSL (ASX: CSL) – up 1.1% to AUD 181.42
• ResMed (ASX: RMD) – up 3.1% to AUD 37.54

Upcoming Economic Factors

The Reserve Bank of Australia is poised to raise the cash rate at its next meeting on Tuesday, following signs of increasing inflation. Economists predict a possible increase of 0.25%, bringing rates to 3.85%. This decision could influence home loan and deposit rates across the board.

RBA Governor Michele Bullock will address Parliament later this week, offering further insights into the RBA’s plans. Meanwhile, the Bank of England and the European Central Bank are expected to maintain their current rates, with the ongoing global economic situation influencing their strategies.

Corporate Reporting Season

The local corporate reporting season is set to begin, with major companies including:

• Credit Corp
• Amcor
• Centuria Office REIT
• Boss Energy
• News Corp

This period will provide key insights into various sectors as companies release their earnings reports.

In conclusion, the Australian market’s recent fluctuations highlight the sensitivity of gold shares to shifts in monetary policy outlooks. Investors will need to stay alert as economic indicators are released in the coming weeks.