How are ASX 200 gold shares reacting to the RBA rate hike?

A boy holds a gold bar with a surprised look on his face due to falling ASX gold mining shares including the Newcrest share priceA boy holds a gold bar with a surprised look on his face due to falling ASX gold mining shares including the Newcrest share price

S&P/ASX 200 Index (ASX: XJO) gold shares initially outperformed the benchmark index following yesterday’s 0.5% interest rate hike from the Reserve Bank of Australia.

Yesterday marked the fourth consecutive month that the RBA increased Australia’s cash rate.

The official interest rate stood at all-time lows of 0.1% heading into May this year, after more than a decade that had seen only rate cuts from the central bank. The cash rate now stands at 1.85%, with RBA governor Philip Lowe forecasting additional rate increases ahead.

Here’s how gold stocks are faring.

ASX 200 gold shares surge, then wane

The RBA reported on its rate hike decision at 2:30pm AEST.

In the hour or so immediately after the bank’s media release, the ASX 200 first shot up 0.5% before finishing the day up 0.4% from the time of the announcement.

But ASX 200 gold shares reacted even more positively, at first.

The S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which contains gold stocks outside of the ASX 200 – initially leapt 0.9% before finishing the day up 0.3% from the RBA’s announcement.

Today, gold stocks are broadly heading the other way, with the Gold Index down 0.8% in afternoon trade today compared to a 0.3% loss posted by the ASX 200.

As for the biggest gold stocks

Investors bid up the prices of ASX 200 gold shares in the hour or so immediately after news of the RBA’s rate hike hit the wires.

The Newcrest Mining Ltd (ASX: NCM) share price initially leapt 0.9% before finishing yesterday flat. Newcrest shares are down 2.4% today.

Shares in Northern Star Resources Ltd (ASX: NST) followed a similar trend, first jumping 0.9% before finishing yesterday up 0.6%. Today the Northern Star share price is down 1.3%.

As for Evolution Mining Ltd (ASX: EVN), the ASX 200 gold share jumped 1.3% higher on news of the rate hike before closing the day up 0.4.% The Evolution Mining share price is flat in afternoon trade today.

While gold, and gold stocks, have historically tended to hold their value well during inflationary periods, investors are keenly aware that gold doesn’t pay a yield.

With interest rates heading sharply higher across most of the world, gold prices have dropped some 4% this calendar year, in US dollar terms.

That’s sent all three of the ASX 200 gold shares mentioned above deep into the red in 2022.

The post How are ASX 200 gold shares reacting to the RBA rate hike? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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