Shares of Newcrest Mining Limited (ASX: NCM) are soaring higher today following a strong surge in the price of gold overnight.
Gold prices rose as much as 1.3% during the session to roughly US$1,134 an ounce, despite comments from the US Federal Reserve which cited stubbornly low inflation as one of the reasons behind its decision to leave interest rates unchanged. Historically, gold has acted as a hedge against inflation.
Newcrest's shares have rallied 9% as a result, compared to a 0.9% lift for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO). Northern Star Resources Ltd (ASX: NST) has also risen 4.7% while EVOLUTION FPO (ASX: EVN) and Resolute Mining Limited (ASX: RSG) are up 2.6% and 13.2%, respectively.
Despite the expectation that gold prices could continue to go higher over the coming days or weeks, there is absolutely no certainty to those forecasts. Gold prices could just as easily decline which would put the miners, and their shares, under even more pressure than they're currently under.
Given the high level of uncertainty, and the risks involved with investing in the sector, it seems investors would be wise to focus their attention elsewhere.
