Gold price heading back up

Since gold touched its recent lows of $1,200/ounce at the end of June, the gold price has rallied over 10% to nearly $1,340/ounce. While the gold price is still a far cry from the levels seen in late 2012, it looks like some share market participants see value at current levels.

The rise in the gold price has put a rocket under gold miners today. While the broad S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.3%, gold stocks are faring much better. Of the top 10 gainers in the index today, five are gold miners: Sirius Resources (ASX: SIR) is up 14%, Evolution Mining (ASX: EVN) is up 6.9%, Newcrest Mining (ASX: NCM) is up 6.4%, PanAust (ASX: PNA) is up 4.5% and Kingsgate Consolidated (ASX: KCN) is up 4.4%.

Given the inherent leverage most gold miners have to a higher gold price, and considering the significant declines this calendar year in share prices (many over 40%), it is perhaps not surprising that gold miners are starting to see some support.

Foolish takeaway

While investing with a contrarian mindset certainly has its benefits, investors should also not forget how unpredictable the gold price can be.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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