The year 2015 has been a bumpy ride for gold with the yellow metal navigating an unsupportive macro environment. A stronger greenback, slump in oil prices and the climb in U.S. equities all conspired to taint the precious metal's splendor and safe haven appeal through the year.

The final nail in the coffin came in December with the Fed finally hiking interest rates, thus ending an era of zero interest rates. This pushed gold to six-year lows and a bearish end to a forgettable year.

The Year That Was for Gold

Gold had a heady start to the year, hitting a high of $1,305 an ounce in January as a flight to safety boosted its prices after the shocking decision by the Swiss National Bank to unpeg the Swiss franc versus the euro. Prices, however, could not be sustained at this level and fell soon after. Once again, safe haven buying triggered by uncertainly over Greece’s future in the Eurozone propped up prices.

The bubble soon burst as Greece reached a bailout agreement and, with the jitters surrounding the country’s departure from the Eurozone being resolved, the safe haven demand for the metal diminished.

Thereafter, China dealt a hard-hitting blow to the bullion market with its shocking revelation of its official gold holdings on Jul 17. China’s gold reserves stood at 1,658 tons at the end of Jun 2015, a 57% addition over gold holdings of 1,054 tons in Apr 2009.

Even though China was the fifth largest holder of gold, the numbers were almost half of market expectations. This triggered heavy selling in the Asian markets and sent gold prices nose-diving to $1,080 an ounce on Jul 20, the lowest point in five years.

Meanwhile, the specter of the much anticipated interest rate hike loomed large on gold prices throughout the year. This was aggravated by lukewarm demand from top consuming countries, China and India, which have traditionally been known for their frenzied demand for the precious metal.  

Ending the Year on a Bearish Note

In its December meeting, the Fed set the new target range for federal funds rate at 0.25% to 0.50%. The central bank also provided a relatively upbeat outlook on the world’s largest economy, indicating that the pace of increase in rates from here on will be gradual.

Gold prices plunged to $1,046 on Dec 17 as the rate hike knocked the wind out of gold. Higher rates tend to weigh on gold as it provides no yield and the metal has to struggle to compete with interest paying assets in a climate of rising borrowing costs.

The yellow metal has recorded a 9.5% fall so far this year with a decline imminent for the third consecutive year. The year has therefore been tough for gold miners and big players like Goldcorp Inc. (GG - Analyst Report) and Barrick Gold Corp. (ABX - Analyst Report) have shored up year-to-date losses of 36.61% and 29.4%, respectively. Shares of Randgold Resources Ltd. (GOLD - Snapshot Report), Franco-Nevada Corp. (FNV - Snapshot Report) and Newmont Mining Corp. (NEM - Analyst Report) followed suit with respective declines of 7.43%, 5.63% and 4.6% year to date.

In response, these miners have been trimming costs and shedding non-core assets to optimize their portfolio as they grapple with lower prices of the metal. Several of these gold producers are also saddled with significant debt. So, a price slump along with the rate hike is expected to make life even more miserable for these producers.

Moreover, expectations for soft near-term demand at a time of the year when gold demand is seasonally strong makes matters worse for gold. Thanksgiving and Christmas buying was light this year as customers abstained from buying gold. In India, gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand.

The first back-to-back shortfall in India’s monsoon rains in three decades has affected the country’s rural population. On top of it, the worst deluge in a century in the southern state of Chennai, which is a major Indian market for gold, will have a negative impact on demand.

The picture in China is also bleak at the moment. China’s GDP in the third quarter slowed down to a six-year low of 6.9%, lower than the 7% growth in the first half of the year despite repeated interest rate cuts and other stimulus measures. It was the slowest since the 6.2% recorded in the first quarter of 2009 during the global recession. Analysts have slashed their forecasts for China's growth over the next three years amid broadening pessimism over the health of the world's second largest economy.
 
4 Tarnished Gold-Mining Stocks

In this scenario, we’ve listed four gold-mining stocks which have lost more than 50% of their value year to date irrespective of their underlying fundamentals. These stocks have also witnessed downward estimate revisions over the past few weeks and are expected to suffer losses in the current fiscal and the next.

Rubicon Minerals Corporation (RBY - Snapshot Report)

Headquartered in Toronto, Rubicon Minerals is a development stage company focused on bringing its 100%-owned Phoenix Gold Project, located in the prolific Red Lake gold district in Northwestern Ontario, Canada, into potential commercial production.

Impact of lower gold prices have been pronounced for this stock, which has plunged 90.56% year to date. The Zacks Consensus Estimate has moved south over the past 60 days for fiscal 2015 and fiscal 2016. The Zacks Consensus Estimate is currently at a loss per share of 5 cents for fiscal 2015 and 4 cents for fiscal 2016.

Timmins Gold Corp. (TGD - Snapshot Report)

Headquartered in Vancouver, British Columbia, Canada, Timmins Gold is a Mexico-focused intermediate gold company with a portfolio of high-quality production and development assets.

This stock has delivered a negative year-to-date return of 85.99%. Its earnings estimates have witnessed downward revision over the past 60 days. The Zacks Consensus Estimate for the current fiscal is at a loss of 4 cents per share.

Yamana Gold, Inc. (AUY - Snapshot Report)

Headquartered in Toronto, Ontario, Canada, Yamana Gold Inc. engages in gold mining and related activities, including exploration, extraction, processing, and reclamation. The company has precious metal properties and land positions in the Americas.

This stock is down 52.49% year to date. Earnings estimates have witnessed negative revisions over the last 60 days. The Zacks Consensus Estimate for fiscal 2015 is at a loss of 8 cents per share.
 

Alamos Gold, Inc. (AGI - Snapshot Report)

Headquartered in Toronto, Canada, Alamos Gold is an intermediate gold producer with diversified production from three operating mines in North America, including the Young-Davidson Mine in northern Ontario, Canada and the Mulatos and El Chanate mines in Sonora, Mexico.

This stock has lost 53.44% of its value year to date. Estimates for both fiscal 2015 and fiscal 2016 have gone down over the past 60 days. The Zacks Consensus Estimate is currently at a loss per share of 14 cents for the current fiscal and 7 cents for fiscal 2016.

Bottom Line

Interest rate increases, a stronger U.S. dollar and low retail demand in India and China will keep gold prices under pressure. Lower gold prices compared with previous years and cost pressure have restricted the ability of gold producers to invest in developing new projects in recent years. Given the dearth in new projects, mine production will slow down in the next couple of years. This could eventually lead to a supply crunch that would support prices. 

Meanwhile, exiting certain underperformers at the right time helps maximize portfolio returns. Given the low gold prices currently, with little hope of revival, we believe it will be wise to get rid of these stocks at the moment.