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Why Australian gold miners have surged higher today

It may have been a tough few weeks for Australian gold miners, but traders have returned to them in their droves today.

At lunch the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) is up 1.7% to 4,498 points.

Amongst the biggest movers on the index with a gain of at least 3% are the St Barbara Ltd (ASX: SBM) share price, the Perseus Mining Limited (ASX: PRU) share price, and the Northern Star Resources Ltd (ASX: NST) share price.

Why are the gold miners higher today?

On Friday the spot gold price climbed higher after Russian state media reported that North Korea is preparing to test a long-range missile that could reach as far as the west coast of the United States.

This has led to the spot gold price climbing to US$1,279 an ounce today, up 1.5% from its Friday low.

Should you invest in the gold miners?

Should tensions escalate in North Korea then there’s every chance that the gold price will continue to rise higher and pull the gold miners up along with it.

But should things cool then I think there is significant downside risk for the gold price and gold miners such as Newcrest Mining Limited (ASX: NCM).

With the U.S. Federal Reserve seemingly intent on raising rates four times between now and the end of next year, it seems inevitable that gold will lose its allure with investors when treasury yields widen.

Overall, I don’t believe the risk/reward on offer with the gold miners is sufficient to make an investment today and would suggest investors look elsewhere in the share market.

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Motley Fool contributor James Mickleboro has no position in any of the 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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