S&P/ASX 200 Index (ASX: XJO) gold shares are defying the broader market sell-off and marching confidently higher on Thursday.
In afternoon trade, the ASX 200 is down 0.6%. The benchmark index is following the lead of US markets.
All the major US indexes finished sharply lower overnight following the latest 0.25% interest rate increase from the Federal Reserve.
But gold stocks are broadly outperforming today.
At the time of writing, the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold shares – is up 1.5%.
Here's how some of the big Aussie gold miners are performing at this same time:
- Northern Star Resources Ltd (ASX: NST) shares are up 2.0%
- Newcrest Mining Ltd (ASX: NCM) shares are up 1.3%
- Evolution Mining Ltd (ASX: EVN) shares are up 2.1%
- Gold Road Resources Ltd (ASX: GOR) shares are up 1.4%
So, why are ASX 200 gold shares smashing the benchmark today?
Why are ASX 200 gold shares outperforming today?
The gold sector is broadly gaining today following an overnight lift in the gold price.
At this time yesterday, bullion was trading for US$1,944 per troy ounce.
Today that same ounce is worth US$1,974, up 1.5%.
The boost in the price of the yellow metal – and by extension the boost for ASX 200 gold shares – likely has less to do with Fed chair Jerome Powell than it does with US Treasury Secretary Janet Yellen.
Gold has been rising and falling over the past two weeks on fast-shifting sentiment surrounding the global banking crisis, sparked by the failure of US-based Silicon Valley Bank.
As a classic safe-haven asset, the gold price has gone up as investor fears over the health of banks have increased.
And Yellen looks to have rekindled those fears by noting that the US government isn't discussing providing deposit insurance to all banks large and small.
"I have not considered or discussed anything to do with blanket insurance or guarantees of all deposits," Yellen said. She added that bank runs "may more readily happen now".
Commenting on Yellen's remarks, Redmond Wong, strategist at Saxo Capital Markets HK said (quoted by Bloomberg):
Smaller banks are likely to face a flight of deposits [following Yellen's] 180-degree change in her comments about covering the uninsured deposits.
Bank lending will slow further or even contract and bring about a recession. Treasury yields may fall further and Treasuries, in particular the front end of the curve, are a buy. Gold is a buy.
With enough investors seemingly aligned with Wong's views, ASX 200 gold shares are making hay today.
