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Should you own these gold miner shares in 2017?

gold bars and coins
Credit: Mark Herpel

Australia’s gold shares are rising again today with the spot gold price lifting to US$1,142 an ounce.

Indeed, the gold miners make up the five highest-performing shares from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) cohort today. Northern Star Resources Ltd (ASX: NST) and EVOLUTION FPO (ASX: EVN) have gained 4.8% and 4.4% respectively, while Newcrest Mining Limited (ASX: NCM), Regis Resources Limited (ASX: RRL) and St Barbara Ltd (ASX: SBM) have gained between 2.1% and 2.4%.

Most other gold businesses have also risen with the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) up 2.6%. That compares to a 0.5% decline for the ASX 200.

According to Market Watch, gold has suffered seven consecutive weekly declines, making it the longest such losing streak in more than 12 years. Ironically, it was around seven weeks ago that Donald Trump won the US presidential election: while many thought his victory would see gold prices surge, it has had quite the opposite effect thus far.

However, The Australian reported that analysts see a gold price revival, which may have helped boost shares across the sector yesterday and again today. It said “Most analysts believe broad concerns about European banks and uncertainty around US president-elect Donald Trump’s policies is likely to support gold prices in 2017.”

Indeed, the gold price could rebound from its current level in 2017, but there are a number of factors that could prevent that from happening. A strong US dollar is one possible hindrance, while Donald Trump’s growth policies could also spur economic growth – at least in the near-term – which could see demand for gold fall further (particularly if US interest rates rise to limit inflation growth).

Predicting future movements in the gold price is inherently difficult, as many of the individuals who loaded up on gold before, or immediately after, Donald Trump’s victory can attest to. While shares in the sector could have a stellar 2017 if gold does rise, there is a very big risk that they will fall if the gold price continues to decline.

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Motley Fool contributor Ryan Newman 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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