Consumer confidence has taken a hit as a result of renewed lockdowns, falling 6.1% this month. The unemployment rate is also up with close to a million Australians out of work. This is bad news for the economy, with hopes of a v-shaped recovery fading. When the economy looks shaky, investors often turn to gold as a measure of protection.
Gold can act as a hedge against economic downturns. This is because its value is (for the most part) inversely correlated to the value of shares. Although the gold price can be volatile over the short term, the previous metal tends to preserve its value over time.
Here are 3 ASX gold shares you can use to hedge your portfolio against a downturn.
Saracen Mineral Holdings Limited (ASX: SAR)
Saracen Mineral Holdings mines gold in the Kalgoorlie region of Western Australia. In the June quarter, the company produced 145,803 ounces of gold. Full year production was a record 520,414 ounces. The miner reported it had cash and bullion of $369.3 million at 30 June 2020, along with $321.5 million debt. This gave Saracen a net cash position of $48 million.
The Saracen share price is up by 68% since the start of 2020, trading for $5.84 per share.
Gold Road Resources Ltd (ASX: GOR)
Gold Road Resources is a mid-tier Australian gold producer with projects in Western Australia's north-eastern goldfields. The company owns 50% of the Gruyere mine, which is forecast to produce an average of 300,000 ounces of gold annually for at least 11 years.
In the March quarter, the Gruyere mine produced 59,595 ounces of gold and is on track to meet full year guidance of 250,000 to 285,000 ounces. The company ended the quarter with cash and bullion on hand of $115 million. Debt was $80 million giving a net cash position of $35 million.
Gold Road shares are sitting at $1.79 per share at the time of writing, up 30.88% year to date.
Silver Lake Resources Limited (ASX: SLR)
Silver Lake Resources' cornerstone asset is the Mount Monger Gold Camp located in the eastern goldfields district of Western Australia. In the March quarter, Silver Lake produced 65,548 ounces of gold as well as 438 tonnes of copper. During the quarter the company made record sales of 68,193 ounces of gold at an average price of $2,170 an ounce. Cash and bullion increased 22% to $227 million at the end of the March quarter with no debt.
The Silver Lake share price is currently trading for $2.30, a gain of 64% since the start of 2020.
