Shares of Newcrest Mining Limited (ASX: NCM) are glistening today after a sharp rise in the spot price of gold.
The shiny metal recorded one of its biggest single-day gains of the year, rising 2.1% to US$1,136.40 an ounce, following the release of weaker-than-expected jobs data from the United States.
Investors are hopeful that the data will lead to a delay of an official interest rate hike by the US Federal Reserve. A rise in interest rates for the first time in almost a decade could hurt demand for gold in two ways:
- First, gold does not yield any interest. A rise in interest rates could attract investors away from the metal
- Second, a rate hike would likely strengthen the US dollar, making gold more expensive for international customers to acquire (this is because gold bullion is quoted in US dollars).
Although it is impossible to predict where gold prices will be next month or next year, investors are taking this news as a positive for the resource, and its miners.
Newcrest is one of the top performing stocks on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) today, with its shares rising an impressive 10.4%. EVOLUTION FPO (ASX: EVN) and Beadell Resources Ltd (ASX: BDR) have also risen 8.3% each, while Northern Star Resources Ltd (ASX: NST) is up 6.3%.
Although there is the potential for these companies to climb even further in the near-term, investors can likely do better in the long run by investing elsewhere.
