Why Newmont Corporation Stock Just Dropped
Key Points
Conflict in the Mideast drove gold prices higher at first, but they're falling today.
War can be inflationary, but it might also convince the Federal Reserve not to lower interest rates.
- 10 stocks we like better than Newmont ›
Newmont Corporation (NYSE: NEM) stock tumbled 7.3% through noon ET Tuesday on a confluence of confusing factors. As you've probably heard, there's war in the Mideast. Ordinarily, investors flee to gold and silver as safe havens in troubled times, and at first, that's what seemed to be happening this time, too.
Problem is, gold and silver prices decided to tank today, and they're taking the stock price of this gold miner down with them. (Newmont also mines silver.)
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Gold and silver prices fall
Gold prices closed February around $5,278 per ounce, according to data from TradingEconomics.com. Prices spiked after U.S. and Israeli forces began striking Iran over the weekend, rising as high as $5,416 early Monday before starting to fade.
At last report, gold was trading at $5,101 per ounce, down 4% from yesterday's close.
The story on silver is similar -- but worse. Silver's price closed at $93.73 per ounce at the end of February before moving higher, topping $96.10 Monday. Today, silver is down 7.4% to $82.42 per ounce.
Is Newmont stock a sell?
Why is this happening? Well, the U.S. dollar -- also a safe haven -- is strengthening. Thus, it takes fewer dollars to buy an ounce of gold or silver. The natural result is falling prices for precious metals.
War can also be inflationary -- which should be good for precious metal prices. But if inflation spooks the Fed into holding interest rates steady, this could lower inflation long term -- or so the thinking goes.
Personally, I expect gold and silver prices to react to war worries the way they usually do. I think the general price trend will be up, not down. With Newmont stock trading for a cheap 20 times earnings, the stock looks like a buy to me.
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Rich Smith has 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.
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