This year has been a great one for many ASX gold miners who have benefitted from a resurgence in the price of gold. The prices of many safe haven assets – including precious metals like silver and gold – have been storming higher recently, driven by international geopolitical uncertainty and fears of a global recession. The spot price of gold even recently broke through the US$1,500 per ounce ceiling for the first time in over 6 years.
How have the ASX gold miners performed recently?
One company that has been benefitting from this rising spot price is Australian gold miner Silver Lake Resources Limited (ASX: SLR). It was the best performing stock on the ASX 200 on Friday after its shares charged 12.5% higher on the back of its positive quarterly activities report.
It announced that it had sold 56,683 ounces of gold for the September quarter at an average price of $1,995 an ounce. Despite investing over $5 million in exploration projects, the strong price of gold helped Silver Lake strengthen its balance sheet position, with cash and bullion increasing by $24.1 million to $155.2 million during the quarter. Also driving the surge of its share price was the company’s assertion that it now expects to hit the upper end of its sales guidance for FY20.
But Silver Lake isn’t the only gold miner that has delivered strong shareholder returns in 2019. The share price of Newcrest Mining Limited (ASX: NCM) has stormed over 60% higher this year, while Saracen Mineral Holdings Limited (ASX: SAR) is up around 27%. Even Resolute Mining Limited (ASX: RSG) shares are still up 10%, despite its share price recently taking a big hit after it announced that damage to a key piece of processing equipment would likely have a material impact on its production for the December quarter.
Rising gold price the silver lining of global uncertainty
With trade tensions between the US and China still simmering, renewed conflict in Syria, lack of direction around Brexit, and now a US presidential impeachment enquiry underway, the only real sure thing for global politics in the short to medium-term is uncertainty. And, generally speaking, it is during times of uncertainty that precious metals like gold can safeguard value.
In the wake of the global financial crisis gold prices surged, peaking in late 2011 at close to US$1,900 an ounce. During the long equity bull market that followed the price of gold dipped, but it is now well and truly on the rise again.
This isn’t to say that global equities won’t head higher or that better returns can’t still be found in other sectors of the market like healthcare and fintech. It’s not even certain that the price of gold will continue to rise. But it does show that devoting a portion of your portfolio to the resources sector – and the ASX gold miners in particular – can help to diversify your portfolio and decrease volatility in your overall returns, particularly during times of global uncertainty and upheaval.
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Motley Fool contributor Rhys Brock owns shares of Saracen Mineral Holdings Limited. 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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