Newcrest Mining Limited (ASX: NCM) has been one of the market's top performing companies today. Its shares have risen 3.7%, compared to a 0.3% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), while they're up 18% over the last fortnight.
The strong performance is the result of a rise in the gold price. The element rose 2.1% to US$1,154 an ounce overnight – its highest price in a month and up roughly 5% since September 15 – as investors continue to seek safety in light of the market's recent volatility.
Indeed, gold has for a long time been seen as a safe-haven as it is viewed as a store of value, and investors have seemingly piled into the gold producers to gain exposure.
In addition to Newcrest, EVOLUTION FPO (ASX: EVN) has also risen 3.2% today while Northern Star Resources Ltd (ASX: NST) and St Barbara Limited (ASX: SBM) are up 1.2% and 5.9%, respectively.
Despite the sector's outperformance today however, investors shouldn't pin too much hope on the gold miners to produce long-term market-beating returns. Indeed, the miners themselves are heavily leveraged to the price of gold itself which, contrary to common belief, is not certain to increase in price over time. There is no way of knowing where it will be tomorrow or even next year, making it a somewhat risky proposition.
At the same time, it is becoming increasingly costly to produce the shiny metal which could also weigh on the miners' future performances. In my opinion, investors would be wise to avoid the sector altogether and focus on some of the market's other opportunities.
