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Up 31% in 1 month: is the Saracen share price a buy?

The Saracen Mineral Holdings Limited (ASX: SAR) share price has been rocketing higher in the last month or so. In fact, the Aussie gold miner’s shares have surged 31.3% in value since 16 June. Let’s take a look at what’s driving the ASX gold share higher and whether or not it should be on your buy list.

Why the Saracen share price has surged higher

The simple answer is that investors are scared. Over the same period, the S&P/ASX 200 Index (ASX: XJO) has climbed 1.9% higher but that doesn’t tell the whole story. We’ve seen a lot of volatility across nearly all ASX sectors in the last month or so as investors try to work out what’s going on with valuations.

Despite the coronavirus pandemic constraining economic growth, shares continue to climb. The market looks to be moving broadly sideways at the moment. I think that’s the competing forces of government stimulus and monetary policy against the clear negative hit to corporate earnings.

However, market volatility is when ASX gold shares thrive. The Saracen share price has been on the move, marching 83.4% higher in 2020 alone. Gold is usually seen as a ‘safe haven’ asset which means demand surges when investors are spooked. That looks to be the case in 2020 with the gold price rocketing towards new decade-highs this year.

Is Saracen on the buy list?

Any ASX share that climbs 80% in the space of 6-7 months is worth watching. However, Saracen isn’t on my buy list right now. Fundamentally, I’m a long-term investor. While I think gold (or gold shares) can have a place in portfolio diversification, I’m not looking to hold Saracen shares for decades ahead.

However, there is certainly a lot to like about Saracen for gold investors. It’s now a seriously heavy hitter in terms of gold production after its Kalgoorlie Super Pit mine acquisition. With the value of gold higher this year, Saracen’s earnings and profitability could rise with it. As a result, I’d be watching Saracen’s August earnings result very closely this year.

With a price-to-earnings (P/E) ratio of 45.4, the Saracen share price is a little on the expensive side. If you’re after good value ASX gold shares, St Barbara Ltd (ASX: SBM) could be a cheaper buy right now.

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Motley Fool contributor Ken 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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