ASX gold shares. They're quickly becoming the gift that keeps on giving in 2020.
Much of the success for ASX gold shares like St Barbara Ltd (ASX: SBM) is due to the coronavirus pandemic.
The global and domestic viral outbreaks have spooked investors and crimped economic growth. Faced with the prospect of a removed government safety net and higher unemployment, investors have flocked to gold as a safe-haven asset.
That fear has pushed global gold prices to an all-time high as of Tuesday. Gold was trading at US$1,963 (A$2,745) per ounce which is good news for ASX gold shares.
But does the soaring gold price mean it's too late to join the party in 2020?
Image source: Getty Images
Should you buy ASX gold shares?
Let's look at how some of the big Aussie gold miners have performed on the ASX in 2020.
The St Barbara share price is up 28.6% in 2020 and is trading at a price-to-earnings (P/E) ratio of 20.59.
It's been a similar story for fellow miner Northern Star Resources Ltd (ASX: NST) this year. The Northern Star share price has rocketed 36.8% higher but trades at a higher P/E ratio of 50.5.
Then there's Saracen Mineral Holdings Limited (ASX: SAR). The Saracen Mineral share price has surged 86.4% and trades at a P/E ratio of 46.2.
This has proven to be the pick of the ASX gold shares so far this year. I do like the Saracen business as it churns out consistent cash flow versus the speculation involved in many other (smaller) ASX companies.
Saracen boasts a market capitalisation of $6.84 billion compared to St Barbara ($2.48 billion) and Northern Star ($11.53 billion).
Saracen is also a 50% owner of the Super Pit gold mine in Kalgoorlie, Western Australia alongside Northern Star.
Given the surge in gold prices over recent months, that November 2019 transaction looks like an absolute steal.
What results can we expect in August?
I'm expecting some strong earnings figures from the ASX gold miners in their August results.
Given the gold price surged in March, I think that leaves a full quarter of potential sales at those higher prices.
That's good news for investors who are hoping for some strong dividends to go with the recent capital gains.
Is it too late to buy ASX gold shares?
The current uncertainty and market volatility could continue for some time, so I don't think it's too late to buy ASX gold shares.
In saying that, I don't think it's wise to start investing with a short-term mindset.
ASX gold shares can have their place in a well-diversified portfolio and as a tactical hedge. However, I think the long-term portfolio fit still needs to make sense before buying.
