The best ASX gold miners from within the S&P/ ASX200 (ASX: XJO) have thumped the returns of the wider index over the past 12 months and could have room to run higher given the global macro environment.
This afternoon the gold price is sitting at US$1,518/oz which is up around 15% over a past 6-month period that has seen the US Fed turn from hawkish to dovish and central banks in Australia and New Zealand lop their benchmark lending rates.
As rates on cash and other risk free money market rates or benchmark 10-year government bonds fall gold becomes more attractive as a store of value even though it doesn’t pay an income.
As such it’s possible the precious metal soars higher through the rest of 2019. Back in 2011 for example it traded around US1,800/oz as markets worried that a Greek sovereign default could spread financial contagion around the Eurozone and globally.
Most Australian gold miners can sell an ounce of gold for an all in sustaining cost (total costs including mining, shipping, etc) between A$1,050 – A$1,300/oz which means they’re printing huge profit margins around A$1,000/oz with gold at A$2,231/oz today.
Leading gold miners like Newcrest Mining Limited (ASX: NCM), Northern Star Resources Ltd (ASX: NST), St Barbara Ltd (ASX: SBM) and Saracen Mineral Holdings Limited (ASX: SAR) have all climbed 50% to 100% or more over just the pst year.
Gold is also traditionally considered a ‘flight to safety’ or ‘risk-off’ trade, which means anyone bearish on the outlook for stock markets may also be interested in gold exposure.
I’ve written a few times over the past couple of months that I expect gold prices could move higher given benchmark government debt is commonly now yielding around only 1.5%, with even negative interest rates on debt or inter-bank deposits actually quite common in Europe.
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You can find Tom on Twitter @tommyr345
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.