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Gold price soars on global unrest

The gold price roared higher overnight as global uncertainty took control.

At the time of writing, one ounce of gold was fetching US$1,275, up from around US$1,257 yesterday afternoon, representing a climb of more than 1.4%. As such, it’s hardly surprising to see the share prices of businesses such as St Barbara Ltd (ASX: SBM) or Evolution Mining Ltd (ASX: EVN) up 1.2% and 0.4% today.

Likewise, Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd  (ASX: NST) have gained 1.4% and 2.1%, respectively.

So, what exactly has caused the gold price to move so sharply?

There are many factors that can impact the price of gold, but it seems the most likely reason investors are pushing the price higher overnight are the rising global tensions – not least between the United States and North Korea. Throw in the growing tensions over Syria and Russia, as well as the upcoming French election, and you have a lot of reasons why investors might be looking to put their money to work in assets that have traditionally been seen as ‘safe havens’ amid global uncertainty.

Investors in the gold sector must know that gold prices can be extremely volatile, thus causing the share prices of the gold miners themselves to sometimes fluctuate wildly as well. Indeed, gold prices have been heavily influenced by past events such as the Global Financial Crisis, and more recently Brexit and the election of Donald Trump as US President, but those events have failed to have a lasting impact on the price of gold.

Gold typically rises when uncertainty and fear climb, and falls when calm begins to return to the market. Of course, things can change and the gold price could continue to rise from here. But investors ought to be careful about getting too excited over the prospects of the shiny metal: should the gold price fall, so too could the miners in the sector.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. 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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