Why Gold Miner Stocks Plunged Today on a Great day for the Markets

Shares of gold mining stocks Barrick Gold (NYSE: GOLD), Newmont Mining (NYSE: NEM), Gold Fields (NYSE: GFI), and AngloGold Ashanti (NYSE: AU) were all down today, falling 4.6%, 2.6%, 6%, and 5.1%, respectively.

The declines were all the more notable as the broader market indexes were up strongly on the day. Yet the move wasn't surprising, as the price of gold fell 3.4% today.

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Gold has generally been moving higher in recent months, and generally in the opposite direction of markets, due to the instability caused by the Trump administration's tariff policies. As angst over worst-case scenarios were partially soothed today due to President Trump appearing to walk back from the administration's maximalist positions last night, markets rallied and gold fell.

Gold has surged 42% over the past year

Gold is often thought of as a "safe haven" asset, or the ultimate hedge against geopolitical catastrophe and perhaps runaway inflation in developed countries. Since President Trump took office, the price of the metal has rallied, as various policy positions and statements from the administration have increased global uncertainty, causing the value of the dollar to fall against other currencies. Gold is priced in dollars, so when the dollar declines, perhaps due to investors pulling away from dollar-denominated assets, gold generally rises.

On "Liberation Day" on April 2, President Trump unveiled higher-than-expected tariffs on many countries, friend and foe alike. Since then, the rhetoric between the U.S. and China has escalated, leaving investors fearing a trade war, skyrocketing prices, and global instability. In addition, President Trump's Truth Social posts criticizing Federal Reserve Chair Jay Powell on Monday also increased fears over the Federal Reserve's independence from politics, which added to the uncertainty over the stability of U.S. dollar assets.

However, the past two days have seen the administration pull back from its positions, at least somewhat. Last night, President Trump declared he had "no intention" of firing Jay Powell. Moreover, Trump also said in the same press conference he believes the current 145% tariffs on China "won't be that high" going forward, adding, "It will come down substantially. But it won't be zero. It used to be zero."

Image source: Getty Images.

The 145% tariffs on goods from China threatened an economic downturn this year, given that China is the U.S.' third-largest trading partner, the largest outside of neighbors Canada and Mexico, and a key supplier of electronics and other crucial items needed by American consumers and businesses. Moreover, the somewhat reckless and haphazard manner in which the administration rolled out tariffs has called into question the "safe haven" status of U.S. Treasury bonds, which paradoxically saw their yields rise even as the markets fell. Usually, Treasury yields and U.S. stocks move in a similar direction.

If U.S. Treasuries don't appear "safe," investors may turn to gold instead as a store of value. That's what's been happening over the past few months, especially since April 2. However, if Trump is now backing away from his tougher stance and relenting on tariffs, that would cause an unwinding of the gold trade, which is what we are seeing today.

All of these aforementioned stocks mine gold as their primary commodity, although some mine other metals as well, such as silver or copper. Therefore, their share prices tend to move along with the price of gold, which fell sharply off their highs today.

Is gold topping out or just getting started?

It's interesting to note that some miners, Barrick Gold in particular, are rapidly looking to cash out of some gold mining operations with prices at new recent highs. Yesterday, the company sold its stake in an Alaska gold mining project and is reportedly actually looking to sell its remaining Canadian operation, the Hemlo gold mine in Ontario, along with another gold mine on the Ivory Coast.

Does Barrick's recent sale and sales proposals mean gold may have topped out for now? That's really hard to say, as it's impossible to know the future trajectory of trade talks, where tariffs may land, as well as global investor sentiment toward gold as a safe haven versus U.S. Treasuries.

However, if the past few months have taught investors anything, it's that gold or gold-oriented stocks can operate as a valuable hedge against other economically sensitive holdings as part of a diversified portfolio, at the very least.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.