3 things every gold investor must know today

Credit: Szaaman

ASX-listed gold miners have been killing it in the first four months of 2016, a welcome change after a poor year in 2015. Shares in EVOLUTION FPO (ASX: EVN) are up a massive 29% so far this year, while Northern Star Resources Ltd (ASX: NST) is up a massive 33%.

However before jumping into gold mining shares today, here are three things that you should be aware of:

1. Analysts reckon the gold price could keep climbing

A sample of analysts questioned by Bloomberg think that negative real interest rates will keep investors hungry for gold as an investment in the short term. Negative real interest rates means that inflation is higher than the interest rate you can earn on your cash savings, which erodes your spending power over time.

This is driving demand for gold which is widely regarded as way to protect against inflation.

2. Yes, the price of gold was being manipulated

It’s a sad truth that anywhere people are motivated by money, rules will be broken in the name of self-interest. We saw this emerge in various forms after the global financial crisis, we saw it with the rigging of LIBOR interest rates, and now we’ve seen it in gold.

According to Reuters, Deutsche Bank AG has reached a settlement on a U.S. lawsuit regarding allegations it was involved in price manipulation for gold and silver.

Until recently the price of gold was set by an ‘afternoon fix’ – a private conference call between big banks which researchers noted showed signs of manipulation and collusion.

3. Newcrest Mining Limited (ASX: NCM) is hitting 3-year highs

Its shares have risen 27% in the last 12 months, while the spot price of gold has risen only 5% in U.S. dollar terms over the same time (although the Aussie dollar is also down slightly over the same period which helps).

Low production costs, a rising gold price and strong production have been fueling investor expectations for a significant rise in earnings this year.

Strong free cash flows may prompt renewed talk of Newcrest Mining paying a dividend. But with a big chunk of debt still sitting on the company's balance sheet, we have an even better option:

Our Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is trading on a 5.6% fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

Motley Fool contributor Regan Pearson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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