How China tensions could be a boon for ASX gold shares

When a major cold or hot war threatens, investors often turn to haven assets like gold.

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ASX gold share price

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ASX gold shares, as a whole, have not had the best of years.

After riding high in the early months following the outbreak of the global pandemic, most ASX gold shares have retraced sharply over the past 12 months.

The Newcrest Mining Ltd (ASX: NCM) share price, for example, has lost 25% over the past full year. The Northern Star Resources Ltd (ASX: NST) has fallen 35%. And the Gold Road Resources Ltd (ASX: GOR) share price is down 29%.

This comes as the gold price has also fallen, down roughly 12% since this time last year. The yellow metal has dropped from US$2,064 (AU$2,827) per troy ounce in early August 2020 to the current price of US$1,810 per troy ounce.

While numerous factors impact the price of ASX gold shares, the value of the metal they dig from the ground is one investors keep a sharp eye on.

Why China frictions could boost the gold price

No one, we have to hope, wants to see recent tensions between the West and China continue to simmer. Let alone get worse.

Not even investors in ASX gold shares, which could receive a boost if these simmering tensions end up driving gold prices higher.

That potential was highlighted by Ian Goldin. Goldin is a professor of globalisation and development at the University of Oxford, a former adviser to South Africa’s Nelson Mandela and a former vice-president of the World Bank.

Speaking at the Diggers & Dealers mining conference underway in Western Australia, Goldin warned of the potential fallout from the United States’ and Australia’s frictions with China.

As the Australian Financial Review reports, Goldin said, “he was bullish about the gold price given the pandemic, the threat of a new Cold War [with China] and as central banks continued to print money as part of stimulus packages”.

“My own view is it stay around US$2000 an ounce. I do think gold will hold its own,” he said.

If Goldin is right and gold prices do stabilise at that level, it will represent more than a 10% increase from the current price. Which in turn will help ASX gold shares boost their profit margins.

How have these ASX gold shares been performing?

Let’s look at the 12-month performance for 3 leading ASX gold shares up top.

More recently the Newcrest share price is roughly flat year-to-date, and up 5% over the past month.

Meanwhile, the Northern Star share price has continued to struggle in 2021, down 22% this calendar year. Over the past month, the share price has turned around, up 4%.

Finally, ASX gold share Gold Road is down 3% year-to-date and up 3% over the last month.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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