Renewed Brexit fears drive gold price higher: Miners to follow

Credit: Szaaman

The spot gold price has jumped again overnight, soaring through US$1,350 an ounce and hitting a two-year high.

Heightened fears over the implications of Brexit, weak US economic data and mixed manufacturing and services data in Asia and Europe added to the mix, causing markets to sink around the globe.

Gold is currently trading at US$1,362 an ounce according to Bloomberg.

Investors are piling into the metal, amid market volatility and weak global growth. Holdings in gold exchange traded funds (ETFs) rose by 6.6 tons to 1,959.1 tons on Friday – the highest level since August 2013 according to Bloomberg.

Markets also appear to be pricing in very low odds of the US Federal Reserve raising interest rates. That would make gold less attractive and bonds more attractive – which would see money flow out of the gold ETFs and likely see a pull back in the gold price.

Australia’s gold miners have already had a strong 2016, and today looks like another strong day for them. At the current exchange rate of around 74.4 US cents, the gold price in Australian dollars is around A$1,828 an ounce. Many Australian-based gold miners are making a motza.

So far in 2016, no less than 18 gold stocks have seen their share prices double – and plenty more are showing double-digit returns. Here’s a sample.

Company price gain
Resolute Mining Limited (ASX: RSG) 462%
Gascoyne Resources Ltd (ASX: GCY) 432%
Millennium Minerals Ltd. (ASX: MOY) 323%
Birimian Gold Ltd (ASX: BGS) 323%
Gryphon Minerals Limited (ASX: GRY) 313%
Dacian Gold Ltd (ASX: DCN) 313%
Burey Gold Limited (ASX: BYR) 256%
Silver Lake Resources Limited. (ASX: SLR) 229%
West African Resources Ltd (ASX: WAF) 207%
Troy Resources Ltd (ASX: TRY) 202%
Beadell Resources Ltd (ASX: BDR) 186%
Saracen Mineral Holdings Limited (ASX: SAR) 153%
Teranga Gold Corp (CDI) (ASX: TGZ) 147%
St Barbara Ltd (ASX: SBM) 136%
Ramelius Resources Limited (ASX: RMS) 136%
Cardinal Resources Ltd (ASX: CDV) 130%
Medusa Mining Limited (ASX: MML) 108%
OceanaGold Corporation (ASX: OGC) 104%

Source: S&P Global Market Intelligence

However, as quickly as the share prices have shot up, they can easily fall as quickly if sentiment changes and the gold price falls. Some analysts are already warning that “Anyone who wants to buy gold is probably already in the market”.

Others are warning that gold and silver prices have shot up so fast, and that a pullback is increasingly likely.

Foolish takeaway

Gold miners may have their day today, but investors should remember that a rising tide lifts all boats. Once the tide goes out, it’s only the companies that have strong fundamentals that will manage to hang onto the share price gains.

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After a double-digit rally for the ASX since 2016 lows, investors should be on high alert. You'll find a full rundown below of 3 shares we think you should avoid today plus one top pick worth buying, even if the market turns south and the RBA keeps rates at an "emergency low." Simply click here to uncover these stocks.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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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