The S&P/ASX 200 (ASX: XJO) started off the day with a surge, up 0.28% to 7,134.1 points, just shy of the all-time high 7,172 the index reached earlier this month. At the time of writing it has pulled back and is sitting down 0.01% at 7,112.6. One sector is standing out amongst the rest: ASX gold shares.
Gold miners are on fire today, contributing two of the day's top ASX 200 performers in Silver Lake Resources Limited. (ASX: SLR) and Regis Resources Limited (ASX: RRL). Silver Lake shares are up a healthy 2.81% today to $2.02 a share, while Regis shares are up 4.71% to $2.67 a share. But it's not just these two companies. Most ASX gold shares are in the sun today. The largest ASX gold miner in Newcrest Mining Ltd (ASX: NCM) is up 2.15% to $29.01. Its slightly smaller rival in Northern Star Resources Ltd (ASX: NST) is up 3.27% to $11.68. I'm sure you're sensing a theme here.
So why are gold miners shining on the market today? These increases are more than what the broader index saw this morning, by quite a bit.
Gold price pushes up ASX gold miners
Like all mining companies their market valuation is primarily the price of the commodity they mine. Miners have relatively fixed costs. As such, any move in the underlying gold price has the potential to exponentially increase the company's profitability. If it costs US$1,000 to extract an ounce of gold, and the price of gold rises from US$1,500 to US$2,000 an ounce, the miner's profitability doubles from US$500 to US$1,000 an ounce, even though gold has only appreciated 33.3%.
Gold has indeed been on an upward climb for a few months now. Just in the past 24 hours, gold has climbed above US$1,900 for the first time since early January. Back in March gold had dropped under US$1,700 an ounce, so this is some substantial pricing appreciation. Around 12% over the past two months, to be precise.
That's why we have seen ASX gold miners appreciate in value. Today's move upwards is just the latest chapter.
Are safe havens back in vogue?
It's interesting to see investors slowly climb back into gold. The yellow metal is a traditional safe haven asset, meaning investors like to buy it when there is a lot of uncertainty or fear going around.
Back in March every other asset, whether it was ASX shares, US shares, cryptocurrencies or property, seemed to be going up. But in the past month or two we have seen a substantial sell-off in some ASX shares, especially those in the tech sector. Inflation fears are largely to blame. We have also seen renewed volatility in the crypto space. These market gyrations might be reminding investors that a safe haven might not be such a bad thing for their portfolios right now.
As such, gold, and by extension, gold miners, seems to be back in vogue to some degree. All of these factors could be contributing to the performance we're seeing today from ASX gold mining shares.
