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Why the Australian gold miners are surging higher again

The S&P/ASX All Ords Gold (Index: ^AXJO) (ASX: XJO) has continued its strong run and is higher by almost 2% in morning trade.

This means the gold index has now gained over 12% since this time last month.

Gold miners Beadell Resources Ltd (ASX: BDR), Perseus Mining Limited (ASX: PRU), Resolute Mining Limited (ASX: RSG), Saracen Mineral Holdings Limited (ASX: SAR), and Regis Resources Limited (ASX: RRL) have stood out with gains of around 3%.

Elsewhere the Newcrest Mining Limited (ASX: NCM) share price and the Northern Star Resources Ltd (ASX: NST) share price are up around 2%.

What happened?

As you might have guessed, the rise in the gold index is a result of the spot gold price surging higher overnight.

Currently the precious metal is fetching US$1,294 an ounce, up over 1% since yesterday and close to its highest level since the U.S. election in November.

Global political uncertainty and a weakening U.S. dollar are largely behind the increase.

What’s next?

Although I am bearish on gold in the long-term, in the immediate term it does look as though political uncertainty in the U.S. and U.K. and Trump’s talking down of the U.S. dollar could yet carry the precious metal higher from here.

Whilst this would be great news for the gold miners, I wouldn’t necessarily be in a rush to invest in them. As rates normalise in the United States and treasury bond yields widen, I expect the allure of gold as a safe haven asset will diminish greatly.

This could lead to a sharp fall in the gold price, dragging down the gold miners along with it. So for now I would suggest investors continue to focus on opportunities elsewhere in the market.

I believe these exciting opportunities, for example, could outperform the gold miners over the next couple of years by a considerable margin.

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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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