Will the new financial year be a good one for gold stocks?

There appears to be a lack of conviction as to where the gold price is headed.

What: It hasn’t been the greatest start to the first day of the new financial year for the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO). After initially jumping higher in early trade, the index sold off throughout the afternoon, closing near its lows down around 0.4%. It wasn’t all bad news however, with a number of widely-held gold stocks enjoying a rally of over 3%.

Many widely held gold stocks enjoyed gains in FY 2014 even though the gold price experienced significant volatility over the twelve-month period. For example, despite some big asset impairments and write-downs gold-giant Newcrest Mining Limited (ASX: NCM) still managed to gain around 7% over the course of the year. Meanwhile Northern Star Resources Ltd (ASX: NST) soared 115% and EVOLUTION FPO (ASX: EVN) jumped 23%. Regis Resources Limited (ASX: RRL) was one of the few larger gold stocks to disappoint falling 43%.

So what: With the spot gold price still hovering around US$1,300 per ounce certain Australian gold producers remain highly profitable and could currently be offering good value to investors.

Now what: While gold investing isn’t for everyone, those who are drawn to this space need to weigh up the production risks for miners if they are operating from a single or even a few mine sites. One way to minimise this risk is through diversification.

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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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