London-listed gold miners bore the brunt of a sharp sell-off on Thursday as a rally in crude oil prices sent bullion sliding and revived concerns that the Federal Reserve will keep interest rates higher for longer. The FTSE 100 slipped 0.6 per cent to 8,197 points, with precious metals producers accounting for the biggest single-day losses on the blue-chip index.
Shares in Fresnillo fell 4.2 per cent, while Endeavour Mining dropped 3.8 per cent and Centamin shed 4.5 per cent. The sell-off came as spot gold tumbled more than 1.5 per cent to trade near $2,340 an ounce, erasing gains from earlier in the week. The precious metal has been under pressure since stronger-than-expected US jobs data at the start of July dampened hopes of an early rate cut from the Fed.
Brent crude, the international benchmark, rose above $88 a barrel for the first time since April, driven by tighter supply expectations and a drawdown in US inventories. The rally in oil revived fears that sticky inflation could force the Fed to hold borrowing costs at their current level well into the second half of the year. Higher rates typically boost the dollar and weigh on non-yielding assets such as gold.
“Gold is caught between two forces: a geopolitical bid from ongoing tensions and a macro headwind from rising real yields,” said a senior commodities analyst at a London-based brokerage. “The oil-driven inflation scare is the dominant factor today, and it’s hitting gold stocks disproportionately because of their leveraged exposure to the metal’s price.”
For UK investors and pension holders, the slide in gold miners compounds a difficult month for the FTSE 100, which has shed nearly 2 per cent since the start of July. Many UK pension funds hold significant allocations to mining stocks through tracker funds, leaving retirement savers exposed to the sector’s volatility. Analysts cautioned that further weakness in bullion could persist if crude continues to rally, though some noted that a pullback in oil would quickly reverse the pressure on gold.
The broader market also felt the chill from the oil rally, with interest-rate-sensitive sectors such as real estate and utilities edging lower. The FTSE 250, which has a heavier weighting toward domestic stocks, fell 0.3 per cent. The pound weakened slightly against the dollar, trading at $1.2860, as traders trimmed bets on a Bank of England rate cut in August.