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No Fool’s Gold: Why ASX gold mining shares are rocketing higher

Pot of gold at the end of the rainbow

Some of the biggest ASX gold mining stocks have seen their share prices jump 10–15% higher in early trade after gold prices hit another record high over the weekend.

What’s happening on the markets this morning?

At the opening bell, the Evolution Mining Ltd (ASX: EVN) share price rocketed 10% higher and was soon followed by its fellow ASX gold mining peers including Resolute Mining Ltd (ASX: RSG) and Saracen Minerals Ltd (ASX: SAR).

On Friday, China announced retaliatory tariffs against the United States (US), which sent the US stock market into panic mode with investors flooding to the traditional safe-haven of gold.

China said it will place additional 5–10% tariffs on imported US goods from 1 September in the latest ramp-up of trade tensions, with fears of a global economic growth slowdown or recession sparking risk-off moves in global markets.

While most investors have taken some sort of hit on the news, with the S&P/ASX 200 Index (INDEXASX: XJO) falling 1.6% lower to 6,419.2 points at the time of writing, ASX gold mining investors have cashed in this morning.

The Evolution share price is up 11.25% at the time of writing, while the Saracen and Resolute share prices have surged 13.36% and 14,73%, respectively.

What else has been happening this morning?

It’s an unlucky day for results announcements on the ASX. Looking at the likes of IOOF Holdings Ltd (ASX: IFL) and Fortescue Metals Group Ltd (ASX: FMG), the share prices from both companies have plummeted in morning trade after they announced their FY19 results this morning despite, in Fortescue’s case, posting a record profit result.

The topsy-turvy August reporting season looks set to continue this week, not that it is likely to deter gold investors who are celebrating this latest turn of events.

Foolish takeaway

While the risk-off move is a positive for shareholders, these stocks are not immune from volatility as we saw recently when the St Barbara Ltd (ASX: SBM) share price plummeted 30% in three days as it announced higher operating costs and lower realised prices.

With the US–China trade war looking set to intensify before it gets better, the ASX gold mining shares may provide a good hedge against further volatility, but I’d expect to see any signs of a resolution send the gold price tumbling in early 2020.

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Returns as of 6th October 2020

Motley Fool contributor Kenneth Hall 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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