This is why it could be time to take profits on ASX gold miners

It really has been an incredible year for the shareholders of some of Australia’s leading gold miners. You only need to look at the performance of the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) so far in 2016 to see just how incredible it has been.

Year to date the index which includes the likes of Newcrest Mining Limited (ASX: NCM), OceanaGold Corporation (ASX: OGC), Resolute Mining Limited (ASX: RSG), St Barbara Ltd (ASX: SBM), and Northern Star Resources Ltd (ASX: NST) has risen a mindboggling 91%.

To put that into perspective, the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has risen just 5% during the same period. Clearly gold has been one of the best places to put your money this year. But is that all about to change?

Well according to a research note out of global investment bank Citi today, yes it is. Analysts at Citi believe that now is the time to start closing your positions in the gold miners.

Whilst I am neither bullish nor bearish on gold at the minute, I sincerely doubt that the gold miners are going to collectively rally another 90% in the next nine months. Therefore I wouldn’t argue against locking in sizable gains to reallocate to different areas of the market today.

Where the gold price goes next is of course anybody’s guess. But with an outside chance of a rate rise in the US this year, it could potentially be about to take a step lower.

Equally there are numerous events which could cause the gold price to go up. But I wouldn’t necessarily expect it to rise if Donald Trump wins the U.S. election. Trump’s plan to lower the corporate tax rate could actually cause the US dollar to rise and the gold price to drop in my view.

The Wall Street Journal estimates that US$2.3 trillion of cumulative foreign earnings from the likes of Apple, Microsoft, and Pfizer are being sheltered overseas in order to avoid paying taxes on them. It is believed that the lowering of the corporate tax rate could result in the repatriation of these funds, causing the US dollar to strengthen from increased buying pressure.

Only time will tell whether Citi’s analysts prove to be right, but it is definitely food for thought as far as I’m concerned.

Lastly, if you do lock in your gains from the gold miners then these three new breed blue chips could be a great place to reinvest your profits in my opinion. Each is growing earnings and its fully franked dividend at a strong rate and could climb higher in the months ahead.

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Motley Fool contributor James Mickleboro 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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