Stock for Paramount Gold Nevada Corp. (PZG) saw a significant tumble yesterday in the afterhours session of trade. This comes after the stock gained substantially over the last month, seeing a near 32.3% gain during the period. Both the heavy gains, as well as subsequent tumble relate to events in Eastern Europe, and particularly with Russia.
PZG Drop Correlates to Russia’s Central Bank to Cease Purchase of Gold
The drop in price is presumably linked to an announcement by Russia’s central bank pertaining to the purchase of gold. It had been notified that the bank would discontinue the purchase of gold bars, on Tuesday. This news seemingly spread panic across the gold markets, as is evident by the PZG downward spiral witnessed today. As an elaboration on its decision, the bank further announced that the decision pertains to an increase in demand. This specifically pertained to household demand that rapidly increased after the removal of value-added tax, driving down cost. The gold market understandably reacted negatively to this, impacting PZG along with the wave too. The uncertainty of the decision, and whether or not other central banks would follow suit evidently heightened panic. As more information pertaining to the decision becomes available with time, downward volatility may see an easing up.
Earlier Rush of Market to Gold Stocks leading to PZG Climb
Similarly, gold stocks such as PZG underwent a climb in the early days of Russia’s invasion of Ukraine. As economic uncertainty loomed, investors felt commodities such as gold and precious metals to be safer options. These would be ideal, due to the ever-increasing threat of inflationary pressures and supply chain disruptions. This market sentiment is primarily the driver behind the 32% climb PZG had experienced. In fact, gold and precious metal stocks and futures each climbed, given their exposure to this market shift. However, these sentiments were not long-lasting, and as economic instability minimized, so did the reliance on gold-like commodities. These factors collectively contribute to the downfall of stocks like PZG.
Conclusion
PZG stock underwent a tumultuous drop in price following recent updates pertaining to the wider industry. A decision by Russia’s central bank to cease the purchase of gold bars sent disruptions across the industry. Uncertainty looms as to whether this would trigger similar banks to follow suit.
