It’s a sea of red on the Aussie share market today. The S&P/ASX 200 (INDEXASX: XJO) is down 5.6% at the time of writing to 5,868 points – a 52-week low. Virtually all gains from 2019’s bumper returns have now been wiped out. Blue chips, value stocks, and growth stocks are all bleeding red today – with one notable exception.
ASX gold shares.
That’s right, there’s a spot of yellow light in the ASX’s ocean of red. The ASX’s largest gold miner Newcrest Mining Ltd (ASX: NCM) is leading the charge with a 6.1% gain today – now trading at $30.83 a share.
Evolution Mining Ltd (ASX: EVN) is doing even better with a 6.67% gain at $4.64.
Saracen Mineral Holdings Limited (ASX: SAR) is also getting high with a 4.20% bump to $4.47 at the time of writing.
All that is gold is indeed glittering today.
Why are ASX 200 gold miners defying gravity?
Well, it’s all to do with the price of the yellow metal itself. Gold is traditionally viewed as a ‘safe haven’ asset. The physical nature of this scarce metal gives investors confidence in times of trauma. And with the coronavirus, we are certainly seeing some trauma hitting the ASX 200 and markets around the globe.
Gold today broke the US$1,700 per ounce price level for the first time since December 2012. In Australian dollars, gold has never been as high as it is as I write ($2,575 an ounce at the time of writing). Ever.
What does all this mean? Well, companies that have millions of ounces of gold sitting underground are suddenly in high demand. For a gold miner like Newcrest, the profitability of mining gold increased by 13% in the last week alone (Newcrest has a mining cost per ounce around US$738). Investors know this and that’s why gold miners are a safe harbour in today’s dramatic market sell-off.
Should you jump on the gold mining bandwagon?
Unfortunately, the best time to buy gold miners like Newcrest would have been last week or earlier. After a stock jumps 5-7% in a day, it’s not normally a great time to follow the crowd. As the saying goes, it’s ‘buy low, sell high’ not ‘buy high’.
In saying that, gold could very well go higher from here, of course. The coronavirus situation doesn’t look to be easing off in the near future and I suspect the appeal of ‘safe havens’ like gold could strengthen further. But that’s a decision you’ll have to weigh up if you’re interested in buying ASX gold miners today.
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Motley Fool contributor Sebastian Bowen owns shares of Newcrest Mining 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.