Newmont's 6% Plunge: A Gold Market Correction or a Buying Opportunity?

Summary
• Newmont (NEM) tumbles 5.75% to $99.70, its lowest since late November
• Silver and gold prices collapse 7.6% and 4.3% respectively, triggering sector-wide selloff
• Raymond James upgrades NEM to $111 'Outperform' despite intraday 6.9% drop
• Bollinger Bands show $97.67 support and $108.49 resistance as key levels

Newmont’s sharp intraday decline mirrors a broader parabolic correction in precious metals markets. While gold and silver prices cratered on profit-taking, the stock’s fundamentals remain intact. With a 16x P/E and 1% yield, the selloff raises questions: Is this a short-term volatility spike or a chance to buy a discounted gold proxy?

Precious Metals' Parabolic Rally Reverses, Dragging NEM Down
Newmont’s 6.9% intraday drop aligns with a 7.6% silver collapse and 4.3% gold retreat. The selloff follows a year-end surge in speculative demand, particularly in China, which drove silver to $84/oz before margin hikes by CME Group forced forced liquidation. While Raymond James raised NEM’s target to $111, the move reflects market psychology over fundamentals. Gold’s 4% drop and thin liquidity exacerbated the unwind, with NEM’s 5.75% decline mirroring the sector’s 3.47% drop in the Gold ETF (GOLD).

Gold Sector in Retreat as Precious Metals Unload Gains
The Gold sector (GOLD) fell 3.47% alongside NEM’s 5.75% drop, reflecting a synchronized selloff. Silver’s 11% intraday plunge—its largest since 2020—sparked a chain reaction across gold equities. Newmont’s 16x P/E remains below its 52-week average of 18x, while the sector’s 14x P/E suggests undervaluation. However, technical indicators like the 14-day RSI (82.46) and overbought conditions signal exhaustion in the short-term rally.

Options Playbook: Navigating Volatility in a Correction-Driven Move
• 200-day MA: $69.35 (well below current price)
• RSI: 82.46 (overbought)
• Bollinger Bands: $85.18 (lower) to $108.49 (upper)
• MACD: 4.54 (bullish) vs. 3.75 signal line

NEM’s technicals suggest a short-term bounce from $97.67 support, but long-term buyers may target $85.18. The options chain reveals two high-conviction plays:

• NEM20260102C81 (Call):
- Strike: $81, Expiry: 2026-01-02
- IV: 151.94% (extreme volatility)
- Delta: 0.8968 (high sensitivity)
- Theta: -0.7248 (rapid time decay)
- Gamma: 0.0101 (moderate price sensitivity)
- Turnover: 9,655 (liquid)
- Leverage: 5.25%
- Payoff at 5% downside: $18.70 (max gain if NEM rebounds)
- Why it works: High IV and leverage amplify returns if NEM rebounds from support. The 5.25% leverage ratio suggests significant gearing for a modest price move.

• NEM20260102P93 (Put):
- Strike: $93, Expiry: 2026-01-02
- IV: 41.47% (moderate)
- Delta: -0.0689 (low sensitivity)
- Theta: -0.0192 (slow decay)
- Gamma: 0.0274 (moderate)
- Turnover: 2,075 (liquid)
- Leverage: 665.23%
- Payoff at 5% downside: $3.30 (limited risk)
- Why it works: The 665% leverage ratio offers outsized returns if NEM breaks below $93, with low delta reducing time decay risk.

Action: Aggressive bulls may buy NEM20260102C81 for a 5.25% leveraged play on a rebound above $97.67. Cautious bears may short NEM20260102P93 if $93 support fails, capitalizing on 665% leverage.

Backtest Newmont Stock Performance
The backtest of NEM's performance after a -6% intraday plunge from 2022 to now shows favorable short-term gains, with the 3-Day win rate at 52.51%, the 10-Day win rate at 55.44%, and the 30-Day win rate at 56.07%. Although the maximum return during the backtest was only 3.05% over 30 days, the consistent positive returns suggest that NEM has the potential to recover from such significant dips.

Buy the Dip or Ride the Correction? NEM’s Crossroads
Newmont’s 5.75% drop reflects a sector-wide correction in precious metals rather than a fundamental breakdown. With a 16x P/E and 1% yield, the stock remains attractively valued despite the selloff. The Gold ETF (GOLD) fell 3.47%, signaling a broader market rotation. Investors should watch the $97.67 support level and $108.49 resistance. If NEM breaks below $97.67, consider the NEM20260102P93 put for a 665% leveraged short. Conversely, a rebound above $97.67 could validate the 16x P/E as a buying opportunity. Act now: Position for a bounce or short the breakdown—either way, volatility is your friend.