Unbelievably, there are only 11 shares from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) cohort that are trading in the black today, and they're mostly gold miners.
Indeed, it was a shocking night for equity markets around the world and it could have been even worse if it wasn't for a late rally on Wall Street. However, the ASX 200 itself has also plummeted more than 2%, dragging almost everything lower in the process.
In times of uncertainty, investors can tend to turn to the 'safety' of gold, which has not coincidentally risen to US$1,193 an ounce – its highest price since June 2015 – from a low of US$1,050 an ounce in mid-December.
The higher gold price, combined with the weaker Australian dollar (which is currently fetching around US 70 cents), are both good for Australian gold miners. Because the gold price is quoted in US-dollar terms, it allows the miners to recognise a higher selling price for their product, helping to boost revenues and overall earnings. It seems investors are confident the recent bout of market volatility could send the gold price even higher.
Despite the heavy falls being experienced by the broader market, the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD), which tracks the country's gold producers, has risen an impressive 6.9% while it has heavily outperformed the ASX 200 over the last two-and-a-bit sessions.
Driving it higher today has been these shares:
- Newcrest Mining Limited (ASX: NCM) share price is up 7.2%
- Northern Start Resources Ltd (ASX: NST) share price is up 7.6%
- EVOLUTION FPO (ASX: EVN) share price is up 6.7%
- Regis Resources Limited (ASX: RRL) share price is up 9.7%
- Beadell Resources Ltd (ASX: BDR) share price is up 1.2%
It's certainly tough in the market right now, and some investors will be tempted by the lure of gold or the miners themselves. That strategy could work, but if the gold price does retreat it could also result in heavy falls across the sector.
