The February/March bear market and general investor pessimism has been pushing ASX gold shares higher in 2020.
As such, leading Aussie producers like Saracen Minerals Holdings Limited (ASX: SAR) and St Barbara Ltd (ASX: SBM) have seen their values rocket this year.
In fact, the Saracen share price has climbed 72.7% while St Barbara shares are up 20.6%. So, as we enter a new financial year, could July be a good time to buy ASX gold shares?
Is July the time to buy?
ASX gold shares tend to do well when the S&P/ASX 200 Index (ASX: XJO) is doing poorly. This seems to fit the narrative at the moment with the benchmark index being down nearly 10% in 2020 and all.
I also think this makes Saracen's recent decision to expand its operations a wise one in hindsight. The company is now a joint venture partner with fellow gold miner Northern Star Resources Ltd (ASX: NST) in the Kalgoorlie Super Pit gold mine.
That acquisition has helped to ramp up operations and maybe even put both ASX gold shares back in the buy zone.
In fact, Saracen recently moved into the S&P/ASX 100 Index in the most recent rebalancing along with NextDC Ltd (ASX: NXT).
Of course, no one knows exactly where the economy or the share market are headed in the next 12 months. However, this uncertainty is perhaps what makes shares like Saracen attractive to some investors looking for a potential downside hedge.
Will ASX gold shares deliver strong gains?
Personally, I'm not a big believer in using ASX gold shares to hedge against a potential downturn.
I do think gold generally has good inflation hedging properties as a real asset. However, investing in companies doesn't get you pure gold exposure given you're still exposed to idiosyncratic company risk.
Instead, I believe a diversified strategy of investing in a basket of ASX shares is still the best, long-term option for portfolio gains. Diversification means you weather the ups and downs with your investments in the long run without stressing in the short-term.
I'm reasonably optimistic that Saracen and St Barbara could hold their gains and even push higher in 2020 given current sentiment. However, if I'm investing for 30 years into the future, I don't have a strong enough conviction to buy in at their current prices.
