Stock Market Wrap-Up: Newmont, Wheaton Miss the Rally

Friday gave investors a sigh of relief, as market participants pushed shares sharply higher late in the day. A press conference from President Trump, starting an hour before the market closed, announced a federal emergency declaration, and that seemed to offer some reassurance that the government will take measures to mitigate the impact of the COVID-19 outbreak. The Dow Jones Industrial Average (^DJI 0.40%), S&P 500 (^GSPC 1.02%), and Nasdaq Composite (^IXIC 2.02%) all posted massive gains of around 9%.

Today's stock market

Data source: Yahoo! Finance.

Yet even among all the good news, some stocks weren't able to participate in the rally. Gold stocks were especially hard-hit, and both Newmont Goldcorp (NEM -1.57%) and Wheaton Precious Metals (NYSE: WPM) found themselves suffering big share-price declines.

Tarnished gold

Shares of Newmont Goldcorp finished the day down 11%. Even though some investors have argued that the gold-mining company would be resistant to a recession, the rebound in stocks caused a reassessment of the need for the yellow metal as a safe haven in investors' portfolios.

Image source: Getty Images.

Gold prices took a big hit on Friday, falling more than $55 per ounce to drop to around $1,500. That stands in stark contrast to the yellow metal's price action recently, as gold had climbed to $1,700 per ounce just a few days ago. Investors in the precious metal had found themselves in a difficult position, as a stock-market rally would naturally reduce interest in gold as a place to reduce risk in investment portfolios. Yet as bad as things were getting in the financial markets, further weakness ran the risk of causing liquidity problems for mining companies, which in turn could have hurt gold's prospects.

Newmont's recent acquisition of Goldcorp has created an industry leader, with more than 100 million ounces in gold reserves as of the end of 2019. That should give the company plenty of ballast to survive in the long run, even if gold prices continue today's retreat. Yet for those who've looked to the mining giant as a port in the stock-market storm, Friday's moves showed the dangers of following that strategy.

A less valuable stream

Elsewhere, Wheaton Precious Metals suffered a 9% drop. Although Wheaton isn't a mining company, it has a lot of the same exposure to gold and silver prices that miners have.

Wheaton Precious Metals is a streaming company, providing financing to mining companies in exchange for the rights to purchase the metals that their mines produce at discounted prices. That gives Wheaton a financial interest in the success of certain mines, both in terms of their production levels and in the prices that the metals they produce will fetch on the open market.

Wheaton initially concentrated on silver, which saw even more dramatic declines Friday, falling about $1.20 per ounce to $14.60. More recently, the company has diversified to get more exposure to gold, as well as investing in oil and gas royalty interests. In the fourth quarter of 2019, Wheaton's streaming interests included 107,000 ounces of gold, 6 million ounces of silver, and 6,100 ounces of palladium -- the last of which has seen an even more precipitous decline this week.

Wheaton Precious Metals will continue to see steady levels of metals production, but the big question is what the market price of those metals will be. Without a near-term rebound, Wheaton could continue to lose ground.