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Are gold stocks set to rise or fall?

Despite the steadying of the gold price, it has been anything but smooth sailing for investors in gold mining stocks, with a number of popular miners leaving shareholders battered and bruised.

Over the past 12 months, shares in gold mining giant Newcrest Mining Limited (ASX: NCM) have fallen 32%, while smaller miners including Silver Lake Resources Limited. (ASX: SLR) and Regis Resources Limited (ASX: RRL) are down 50% and 55.5% respectively.

Things could be looking up for investors in the precious metal

Despite the volatility amongst miners, the spot price of gold does appear to have stabilised with the commodity once again hovering around the US$1,300 per ounce level after the swift fall between September and December last year took the precious metal from a high of US$1,430 to a low of US$1,180. In fact the gold price has gained around 8% this calendar year despite issues such as the Ukraine Crisis and persistent weak global economic growth.

Some traders are currently describing gold as range bound, which is not a bad thing when you consider equity markets are hitting new highs. For gold to be holding at these levels could suggest a floor price has formed and should further global macro events flare up, US inflation tick higher, or economic data deteriorate then a move higher in the gold price could certainly be on the cards.

With some investors predicting a stock market correction could happen soon, using defensive commodities as a hedge for your portfolio can make sense

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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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