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Gold miners are soaring

ASX-listed gold miners are soaring, after the gleaming metal touched a one-week high price, and currently trades at around U$1,263 an ounce.

The metal’s price jumped after the US dollar fell on weak US economic data. There’s nothing the gold price likes more than negative economic data. It means the odds of the US Federal Reserve raising interest rates anytime have been dashed. The central bank is unlikely to raise rates if it feels the economy is weak.

Raising interest rates makes other types of asset classes more attractive, particularly fixed income assets like bonds and US Treasurys. As gold doesn’t offer investors any income return, it struggles to compete with those that do. However, markets are still pricing in a 65% chance of the US central bank raising rates in December according to the Wall Street Journal.

Some analysts, like David Govett, head of precious metals at brokerage Marex Spectron has told Bloomberg that the December rate rise is already factored into the gold price and that he is advising clients to buy gold on any falls.

Here’s how the gold miners are faring on the ASX today

Company Share Price Market Cap ($m) Gain
Alkane Resources Limited (ASX: ALK) $0.52 $262.7 7.2%
West African Resources Ltd (ASX: WAF) $0.34 $160.4 4.7%
Beadell Resources Ltd (ASX: BDR) $0.46 $481.2 4.6%
St Barbara Ltd (ASX: SBM) $2.69 $1,337.8 5.1%
Saracen Mineral Holdings Limited (ASX: SAR) $1.21 $975.5 5.2%
Cardinal Resources Ltd (ASX: CDV) $0.69 $207.9 3.8%
Millennium Minerals Ltd (ASX: MOY) $0.28 $222.6 3.6%
Northern Star Resources Ltd (ASX: NST) $3.98 $2,390.2 2.8%
OceanaGold Corporation (ASX: OGC) $4.05 $2,522.4 3.3%
Perseus Mining Limited (ASX: PRU) $0.51 $527.5 3.0%
Kidman Resources Ltd (ASX: KDR) $0.60 $189.5 1.7%
Resolute Mining Limited (ASX: RSG) $1.70 $1,246.6 2.7%
EVOLUTION FPO (ASX: EVN) $2.22 $3,728.0 2.5%
Metals X Limited (ASX: MLX) $1.35 $818.0 2.7%
Newcrest Mining Limited (ASX: NCM) $21.86 $16,759.8 2.2%
Regis Resources Limited (ASX: RRL) $3.35 $1,678.3 1.8%
Dacian Gold Ltd (ASX: DCN) $3.32 $450.5 0.6%

Source: Google Finance

The problem for the gold miners is that higher interest rates appear inevitable over the medium-to-long-term. That is going to send the gold price lower and the share prices of the gold miners down.

Buyer beware.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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