Unfortunately for the second time this week the Australian share market is a sea of red in morning trade following heavy declines in U.S. markets overnight.
But one group of shares has managed to defy the market and push higher today – the gold miners.
At the time of writing the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) is up by 0.9% to 4,744.5 points.
Here is the state of play in the industry at the moment:
- The Evolution Mining Ltd (ASX: EVN) share price is up almost 3% to $2.75.
- The Newcrest Mining Limited (ASX: NCM) share price is 1% higher to $21.93.
- The Northern Star Resources Ltd (ASX: NST) share price has climbed 1.5% to $5.79.
- The OceanaGold Corporation (ASX: OGC) share price is up 4% to $3.24.
- The Resolute Mining Limited (ASX: RSG) share price is 2% higher at $1.08.
- The Regis Resources Limited (ASX: RRL) share price is up 1% to $3.98.
- The Saracen Mineral Holdings Limited (ASX: SAR) share price has climbed 2% to $1.44.
- The St Barbara Ltd (ASX: SBM) share price has pushed 2% higher to $3.72.
Why are the gold miners higher?
Today’s gold miner gains appear to be related to a flight to safety by investors after the U.S. market corrected amid concerns that rising interest rates will drag down economic growth. Fellow safe haven assets the Japanese yen and Swiss franc have also pushed higher.
Whilst I can understand the latter two, I’m not entirely sure why investors have flocked to gold. After all, the reason that markets are melting is the prospect of quicker than anticipated interest rate rises.
And as rates rise, bond yields tend to widen. Generally this will reduce the allure of yield-less gold, causing its price to fall. After all, if you can get a risk-free 3% yield from a Treasury Bond, why would you put your money in the precious metal in volatile times?
In light of this, I continue to believe that investors ought to stay clear of the gold miners and would instead suggest looking for bargain shares to buy after today’s sell-off.
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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.