After a few weeks of fury and frenzy over gold prices, ASX investors seem to have moved on to bigger and better things. I get it. When gold falls from record highs of more than US$2,089 an ounce to today's price of US$1,943, shares like Zip Co Ltd (ASX: Z1P) – which shot up more than 27% just yesterday – are just more interesting. It's funny how it's only when an asset is reaching record high prices that everyone wants a piece of the action.
But now that the market for the precious metal has cooled somewhat, is this pullback in the gold price a buying opportunity for gold, gold exchange-traded funds (ETFs) or gold mining shares?
Does gold still glitter?
The gold price is now down around 7% from the all-time highs reached earlier this month on 7 August. Even so, it remains above the previous all-time high of US$1,921 an ounce that held between 2011 and August 2020.
Gold miners (themselves a leveraged bet on the gold price) have also fallen over the past month. The ASX's largest gold digger Newcrest Mining Ltd (ASX: NCM) is trading for $32.23 today (at the time of writing), down more than 12% since 6 August. Other gold miners have faired similarly. Saracen Mineral Holdings Limited (ASX: SAR) is down 19% over the past month, whilst Northern Star Resources Ltd (ASX: NST) is down more than 15%.
On one level, this isn't an extraordinary move. Global share markets have had a very good August so far. The S&P/ASX 200 Index (ASX: XJO) is up 3.7% so far this month, whilst the flagship American index the S&P 500 is up 6.5%. Gold is traditionally a 'risk-off' asset, which means it tends to fall in value when 'risk-on' assets like shares are rising.
But I still think there's room for the gold price to climb higher. And if I'm right, this small pullback we have seen in August might represent a good buying opportunity if you missed the boat on the last gold rally.
I still think gold has room to climb because the factors that drove gold's rally from around US$1,519 an ounce at the start of the year to today's levels haven't gone away.
The coronavirus pandemic is still (unfortunately) wreaking havoc around the world, despite the recent performance of global share markets.
Central banks are still printing unprecedented levels of monetary stimulus.
And interest rates are still at record lows, both in Australia and around the world.
Foolish takeaway
If this current rally that we're seeing in shares abates, I would expect interest in the gold price to pick up once more. And if that happens, it might be too late to get in at the prices that gold-related assets are seeing today. Long story short, if you want to have some exposure to gold in your portfolio but you missed your chance last time, today might be a good day to take the plunge.
