ASX 200 gold shares smashing the benchmark as gold price hits new all-time highs

The All Ordinaries Gold Index is up 3.7% on Monday.

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S&P/ASX 200 Index (ASX: XJO) gold shares are starting the week out with a bang.

In early afternoon trade on Monday, the ASX 200 is up a very healthy 1%.

But the big Aussie gold stocks are leaving those gains in the dust as bullion prices break into new all-time highs.

That sees the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold shares – up 3.7%.

Here's how these five big gold producers are performing today:

  • Northern Star Resources Ltd (ASX: NST) shares are up 3.7%
  • Ramelius Resources Ltd (ASX: RMS) shares are up 3.3%
  • Gold Road Resources Ltd (ASX: GOR) shares are up 2.9%
  • Evolution Mining Ltd (ASX: EVN) shares are up 3.3%
  • Bellevue Gold Ltd (ASX: BGL) shares are up 5.0%

Here's what's happening.

ASX 200 gold shares celebrate a record gold price

The previous record gold price of just under US$2,075 per ounce was set on 7 August 2020, in the early months after the outbreak of the global pandemic.

That record held until last night when bullion topped US$2,135 per ounce.

It's since retraced a touch, with the yellow metal currently trading for US$2,092 per ounce.

This, of course, is most welcome news for investors in ASX 200 gold shares.

As an astute reader recently reminded me, it's not a precise linear relation between the gold price and the profits earned by the big gold producers. There are other metrics at play. Those include possible hedging commitments and potential adjustments to the grade of the miners' ore bodies in response to changing gold prices.

But at the end of the day (or year), the profits reaped by ASX 200 gold shares increased with a higher realised gold price. And that's clearly spurring investor interest today.

Why did the gold price hit new all-time highs?

Bullion has been benefitting from its haven status amid geopolitical uncertainty and rising global conflicts, most recently enflamed by the Hamas terrorist attack on Israel.

One of the headwinds, though, has been fast-rising interest rates. Gold, which pays no yield, tends to do better in an environment of lower or falling rates.

The new record gold price sending ASX 200 gold shares soaring today looks to be linked to a potential end of this interest rate headwind. This came as Fed chair Jerome Powell indicated that the United States appears to be winning its battle against inflation, saying policy at the world's most watched central bank is "well into restrictive territory".

Commenting on the soaring gold price, Kyle Rodda, a senior market analyst at Capital.com said (quoted by Bloomberg), "Markets are piling in on the rate cut bets. Gold can run higher and will do at the earliest sign of a recession."

Which puts investors in ASX 200 gold shares in a bit of a quandary.

Should we be hoping for a US recession?

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 Scott Phillips.

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