It’s been wild ride for resources investors over the past year.
Even the safe and “diversified” giants BHP Billiton Limited and Rio Tinto Limited crash landed as commodity prices plummeted.
Whilst it’s fair to say it’s been a disappointing year for the sector, the same cannot be said for gold producers.
Indeed whilst falling oil, iron ore and coal prices have wreaked havoc on the broader S&P/ASX 200 (ASX: XJO) (INDEX: ^AXJO), Australian producers of the shiny metal – benchmarked by the S&P/ASX All Ords Gold (ASX: XGD) (INDEX: ^AXGD) index – have enjoyed a return of nearly 20% over the past 12 months.
That’s despite the price of gold (in US dollars) climbing around just 1% year over year, to $US1,226 per ounce.
On the market today, miners Beadell Resources Ltd (ASX: BDR) and Resolute Mining Limited (ASX: RSG) have seen their share prices jump up 15% and 9%, respectively. Whilst Medusa Mining Limited (ASX: MML) and Northern Star Resources Ltd (ASX: NST) are also up strongly.
Whilst there’s little in the way of company specific news to explain the sudden price jump, a number of catalysts are shaping up which could lead to potentially higher share prices and gold spot prices throughout the coming year.
Firstly local producers have welcomed a falling Australian dollar, which has boosted the gold price higher to nearly $1,500 per ounce. Given their costs are denominated in the local currency, a number of gold miners will experience significantly wider profit margins, especially after years of cost cutting and efficiency improvements.
Then there’s the improving likelihood of an increased gold spot price in the next year, which is exciting investors.
With gold being a hedge against inflation and uncertainty (meaning investors buy gold when the economic outlook appears bleak), the prospect of rising US interest rates has some investors concerned. According to a survey by Bullion Vault, 29% of respondents said monetary policy will be the catalyst for higher gold and silver prices in the next year. However that wasn’t confined to the US alone.
Indeed the Eurozone is expected to fire up its own version of quantitative easing with concerns over deflation looming. Couple that with the Greek election later this month and once again the world could become fixated on the risks facing the European block, therefore driving up gold prices.
Whilst it appears likely 2015 will be characterised by heightened volatility, investing in gold stocks is not for the feint hearted. Whilst prices could meet analysts’ expectations, there is really no way of knowing where the price will end up. However if you are looking to make a speculative bet, now could be the right time. Personally, I’d rather stick to finding great dividend stocks trading at a discount…
Motley Fool Contributor Owen Raszkiewicz has no financial interest in any of the mentioned companies. You can follow Owen on Twitter @ASXinvest.