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Is it time to buy ASX 200 gold stocks to hedge your portfolio? 

Concerns about the strength of the global economy, uncertainties around trade negotiations and geopolitical tensions continue to apply stress on equity markets. This has left the gold spot price soaring in the past two months from US$1280 to more than US$1400.

Since May, the share price of these four ASX gold miners has also been soaring:

  • Newcrest Mining Ltd (ASX: NCM) up 30% to $32.74
  • Northern Star Resources Ltd (ASX: NST) up 48% to $12.75
  • Evolution Mining Ltd (ASX: EVN) up 42% to $4.62
  • Saracen Mineral Holdings Ltd (ASX: SAR) up 57% to $4.00

The current climate is perfect for gold producers, but the question remains – is the sector running out of steam or is this an opportunity for investors to expose their portfolios to both growth and protection?

What’s happening with the gold spot price?

The gold spot price is currently sitting at the US$1400 mark and has been impacted by myriad factors, including:

  • geopolitical tensions, such as US–China trade negotiations, US–Iran tensions, and Brexit
  • economic factors, such as poor retail sales, low inflation, and slowing growth
  • monetary policy, such as further interest rate cuts resulting in negative yields

All work in favour of creating a bullish climate for the yellow metal. The Australian dollar is also sitting near two-year lows, which further leverages healthy margins for low-cost gold producers.

Why Northern Star might be the golden ticket

If I had to pick one gold stock to invest in, it would be Northern Star.

Northern Star has been a gift that keeps on giving. For the past five years, NST has delivered an average annualised return on equity (ROE) of 34% with strong cash generation that helps fund strategic growth opportunities and dividends.

While Northern Star does not possess the lowest all-in sustaining cost (AISC) for gold production when compared to the likes of Newcrest Mining or Evolution, it is their ability to grow their capabilities while looking for further growth opportunities that sets them apart.

Last year, NST acquired the high grade Pogo underground gold mine in Alaska, USA for A$351 million. This immediately transformed Northern Star into an 850–900kozpa global gold producer with three Tier-1 assets across multiple jurisdictions. Pogo is undergoing a ramp up in production while showing resource and reserve growth potential.

Foolish takeaway

While markets are cautiously bullish and subject to heightened stress and risk, investors may want to consider adding gold to their portfolio for protection.

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Motley Fool contributor Lina Lim 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 Scott Phillips.

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