Here’s why the gold miner shares are going berserk today

Despite the Federal Reserve hiking interest rates overnight, Australia’s leading gold miners were given a boost as the gold price defied the odds and edged higher.

At the time of writing the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) has bolted around 4% higher, bringing its year-to-date return to just over 10%.

Key movers amongst the gold miners include:

  • The Beadell Resources Ltd (ASX: BDR) share price is up 6% to 30.2 cents.
  • The Newcrest Mining Limited (ASX: NCM) share price is up 3% to $22.31.
  • The Northern Star Resources Ltd (ASX: NST) share price is up 5.5% to $4.13.
  • The Resolute Mining Limited (ASX: RSG) share price is up 9% to $1.47.
  • The Perseus Mining Limited (ASX: PRU) share price is up 11% to 37.2 cents.
  • The St Barbara Ltd (ASX: SBM) share price is up 7% to $2.66.
  • The Troy Resources Ltd (ASX: TRY) share price is up 7% to 15.5 cents.
  • The West African Resources Ltd (ASX: WAF) share price is up 8% to 21 cents.

Why has the gold price rallied?

Overnight the spot gold price rose almost 2% to US$1,222 an ounce. Though it is worth noting that this rally is more to do with the weakening of the U.S. dollar than an increase in demand for the precious metal.

Although the Fed raised rates, it appears to have left the market feeling underwhelmed by signalling just two more rate rises this year. In the last couple of weeks the Fed had hinted that the pace of tightening could pick-up, but this doesn’t appear to be the case any longer.

Are the gold miners a buy?

I see this as a temporary reprieve for the gold price, but expect to see it head down towards US$1,000 an ounce in 2018.

As I said yesterday, the gold price is highly sensitive to rising interest rates as it increases the opportunity cost of holding the non-yielding metal. At the same time rising rates also boost the U.S. dollar, which it is priced in.

Although Australia’s gold miners may now enjoy higher prices for a little longer than previously anticipated, I wouldn’t recommend an investment in them.

Just because the market expects just three rate rises this year, doesn’t mean there won’t actually be more. After all, up until a couple of weeks ago nobody believed there was a chance of a rate rise this week.

Instead of risking your hard earned money in the gold miners, I would suggest you look at an investment in these three hot growth shares. Each has enormous growth potential which I think makes them a clear buy right now.

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks means stability, profitability and regular dividends, often full franked..

But knowing which blue chips to buy, and when, can often be fraught with danger.

The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

If you're expecting to see the likes of Commonwealth Bank, Telstra and Wesfarmers shares on this list, you'll be sorely disappointed. Not only are their dividends growing at a snail's pace, their profits are under pressure too due to the increasing competitive environment.

The contrast to these "new breed" blue chips couldn't be greater... especially the very real prospect of significant share price gains, something that's looking less likely from the usual blue chip suspects.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.

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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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