Australia’s mining sector, a standout performer on the local sharemarket over the past year, has recently reversed course to become the worst-performing segment. This swift downturn is attributed to profit-taking, renewed Middle East conflict, artificial intelligence jitters, and fears of US Federal Reserve interest rate hikes. Despite the recent turbulence, analysts suggest this “air pocket” provides a timely opportunity for investors to re-enter the sector before the upcoming reporting season.
While the S&P/ASX 200 materials sector surged nearly 33 per cent in the last year, it has tumbled almost 10 per cent in the past month. The renewed fighting in the Middle East has pushed oil prices towards US$100 a barrel, reigniting inflation concerns. Concurrently, fears of higher US rates have significantly impacted gold prices, which have fallen from a January peak near US$5,600 to around US$4,000 an ounce, given its non-yielding status. ASX-listed gold producers, such as Evolution Mining, a gold miner, have tracked this decline. ETF Shares chief investment officer David Tuckwell commented that gold had been a “crowded trade” and experienced multiple negative factors simultaneously, including profit-taking and ETF outflows.
Another contributing factor is the unwinding correlation between industrial metals like copper and aluminium and the artificial intelligence trade. A sell-down in chipmakers and memory stocks, partly driven by competition like Moonshot’s Kimi K3 model, has raised questions about sustained AI spending. David Franklyn of Argonaut’s natural resources fund noted this momentum shift encouraged profit-taking in copper stocks, including Sandfire Resources, the ASX’s only pure-play copper producer. Bell Potter analyst Stuart Howe highlighted a significant “dislocation” for resource indices compared to the broader ASX 200, suggesting quality names appear oversold and present an attractive entry point. Howe’s top picks include copper and gold producer Aeris Resources, and gold miners such as Capricorn Metals and Evolution Mining.
