Shares in ASX-listed gold miners are marching higher this afternoon as the gold price continues to climb on expectations that the timing of a cash rate hike in the US is likely to be delayed.
This has resulted in some gold price strength as the US dollar softens and the precious metal becomes more affordable to global investors. This afternoon gold is fetching US$1,262 an ounce, after climbing steadily since the weaker-than-expected US jobs data released at the end of the last trading week in Australia.
Since Monday the ASX-listed gold miners have reacted as follows:
· Newcrest Mining Limited (ASX: NCM) up 15.7%
· Northern Star Resources Ltd (ASX: NST) up 8.2%
· EVOLUTION FPO (ASX: ENV) up 12.5%
· St Barbara Ltd (ASX: SBM) up 26.3%
· Silver Lake Resources Limited (ASX: SLR) up 7%
· Regis Resources Limited (ASX: RRL) up 17.7%
A lot of the companies listed above are near multi-year share price highs as the weakening Aussie dollar is an additional margin-boosting tailwind with mining costs incurred in Australian dollars, while revenues are earned in US dollars.
However, the gold price's recent strength will reverse if the US Fed remains on its elected path of normalising cash rates over the short-to-medium term. Gold companies also attract short-term speculators who tend to own the stocks for a good time, rather than a long time. Investors should be aware this means there'll likely be a rush for the exits on the first sign of renewed weakness in the gold price.
Over the past two years the price of gold is marginally down, while it is down around 17 per cent over the past five years. Evidently, the long-term trend remains down to sideways as the US economy strengthens and this is unlikely to change without a significant shock to the global financial system.
The next potential global headache is the June 23 referendum on the UK's membership of the European Union. A Brexit vote would mean a mass flight to safety, which is another factor currently supporting the gold price as investors look to hedge against this risk.
