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Why the gold price is sending the miners higher today

Whilst the ALL ORDINARIES (Index: ^AXAO) (ASX: XAO) is just about keeping its head above water today, it certainly is a different story for the S&P/ASX All Ords Gold Index (Index: ^AXGD) (ASX: XGD).

As the chart below demonstrates, the gold index is up sharply today and in early afternoon trade has risen 1.1% compared to the 0.1% gain for the All Ordinaries.

Gold miners 0601

Source: Google Finance

Although the majority of Australia’s gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) are posting gains, a number of other miners are making notably bigger gains than others.

The standouts today in my opinion have been Perseus Mining Limited (ASX: PRU), OceanaGold Corporation (ASX: OGC), Alkane Resources Limited (ASX: ALK), Beadell Resources Ltd (ASX: BDR), and AngloGold Ashanti Limited (CHESS) (ASX: AGG), with gains of at least 4% each.

These gains come after a survey by Bloomberg revealed that despite the prospect of interest rate hikes in the United States, traders are the most bullish on the gold price since the end of 2015.

According to the survey, traders are bullish due to worries over political developments in Europe and the United States after Donald Trump’s election victory, together with an expectation of stronger demand for the precious metal ahead of the Lunar New Year.

This bullish view from traders would help explain why the spot gold price has risen over 4% since the Christmas break to US$1,177 an ounce.

Despite this I wouldn’t be in a rush to invest in the gold miners. I expect that under Donald Trump’s presidency the United States will see at least three rate hikes in 2017. If this happens then I believe it will place significant pressure on the gold price and Australia’s gold miners.

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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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