S&P/ASX 200 Index (ASX: XJO) gold shares have been surging higher over the last few months. Can this continue, and is the outlook strong for the sector?
Gold is an interesting commodity. It has been used for thousands of years and in recent decades it has been thought of as a hedge against market volatility as well as an inflation hedge.
Over the last three months, a number of ASX gold mining shares have jumped higher:
The Northern Star Resources Ltd (ASX: NST) share price has gone up by 43%.
The Regis Resources Ltd (ASX: RRL) share price has risen by around 40%.
The Bellevue Gold Ltd (ASX: BGL) share price has gone up by around 80%.
The Evolution Mining Ltd (ASX: EVN) share price has risen by around 70%.
In summary, it has been a good period for ASX gold shares. But, can it continue?
Expert views
According to reporting by the Australian Financial Review, RBC Capital Markets has just upgraded its gold price forecast for the year up by 1% to US$1,735 per ounce.
In 2024, RBC Capital Markets thinks that the gold price will be US$1,700 per ounce, though this was 1% lower than its previous forecast.
The long-term forecast by the broker is for the gold price to be US$1,600 per ounce – that forecast was unchanged, according to the AFR. In the note, the broker said:
We view a brighter macro backdrop ahead for gold, although prices have been resilient in the face of significant prior headwinds, and future upside may have already been front-run.
The broker said that the forecast changes it had done for gold increased its Australian coverage 2023 financial year's earnings per share (EPS) by "typically" 5% to 10%.
The Australian Financial Review reported that RBC Capital Markets' stock recommendations were unchanged. It favours Northern Star Resources, Regis Resources, Bellevue Gold and St Barbara Ltd (ASX: SBM).
However, RBC Capital Markets thinks that Evolution Mining will underperform.
Foolish takeaway
The gold price is unpredictable, though the demise of cryptocurrency values has probably helped bring back some confidence in the commodity as a defensive idea.
ASX 200 gold miner shares can still suffer from mining-related risks and setbacks, so that's something to keep in mind.
If the gold price does keep going up, then the miners can earn more profit and pay stronger dividends. Time will tell what happens next.
