The Motley Fool

Gold miners are soaring as Italian banks face collapse

They may be rarer and rarer, but today has been a positive day for shareholders of many of Australia’s leading gold miners.

The shares of Medusa Mining Limited (ASX: MML), OceanaGold Corporation (ASX: OGC), Perseus Mining Limited (ASX: PRU) and Resolute Mining Limited (ASX: RSG) have been the standouts today. All are up around 3% at lunch following a small rise in the gold price.

At the time of writing the spot gold price is fetching US$1,194 an ounce, approximately 2% higher than last week’s low.

The reason for gold’s resurgence has been put down to concerns over Sunday’s referendum in Italy according to Bloomberg.

Prime Minister Matteo Renzi has previously pledged to resign if voters reject his constitutional reforms. Bloomberg believes that if Mr Renzi does quit, the political and economic instability that it causes will put up to eight Italian banks at risk of failing.

There are fears that a failure of this kind could quickly spread across Europe and then the rest of the world in a similar way to the Global Financial Crisis.

Unfortunately for Mr Renzi, it looks as though he’ll have a big decision to make on Sunday. Following in the footsteps of the Brexit and the election of Donald Trump, voters in Italy look set to vote against the constitutional reforms according to recent polls.

This could potentially drive the gold price higher in the next few days, much to the delight of St Barbara Ltd (ASX: SBM), Regis Resources Limited (ASX: RRL), and Newcrest Mining Limited (ASX: NCM) investors.

Whilst I will happily admit that a mass bank failure in Italy would be terrible for the European economy and could send the gold price soaring, I think it is still far too early to speculate on such an eventuality.

So for now I would suggest investors continue to stay clear of the gold miners and focus on other areas of the market.

Rather than risk your hard earned money in the gold miners, I would go where the smart money is going in 2017: these hot stocks. Is yours there yet?

Big, Fat, Dividends

This company’s dividend is almost the stuff of legends. Its reliable cash flows support a high payout ratio, and the company’s stash of franking credits are the cherry on the top of the dividend cake. Based on the last 12-months of dividends, shares are offering a fully-franked 6.5% yield, which grosses up to a whopping 9.3%, when those franking credits are included.

Discover out the name of this blue chip share along with 2 others in our new FREE report "The Motley Fool’s Top 3 Blue Chips Stocks For 2017."

Click here to receive your copy.

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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.