Investing in ASX gold shares

An investment in ASX gold shares can be a great way to diversify your portfolio – and might even help protect your wealth in a market downturn.

Old chest filled with gold coins

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What are ASX gold stocks?

ASX gold stocks are shares in companies involved in the mining, production, and refinement of gold. They include mature mining companies with one or more projects already in production or junior exploration companies trying to discover new gold deposits.

Gold shares can also include exchange-traded funds (ETFs) like Global X Physical Gold (ASX: GOLD), backed by physical gold. This investment vehicle trades on the ASX just like regular shares but is designed to deliver investors the same returns as gold.

Like other ETFs, the Global X Metal fund pools together money raised from multiple investors and uses that to invest in assets. In this case, gold bullion. Because the physical commodity backs it, the price of units in the fund should closely track gold prices. You can even choose to redeem your investment in the fund with actual gold bars.

It's important to note that not all ETFs are backed by a physical commodity. Because of the costs involved in storing commodities like gold, some ETFs instead trade futures contracts, which can deliver very different returns to the spot gold market. 

If you are considering investing in a gold ETF, check whether the fund is backed by futures or the physical commodity, as they come with different risk and return characteristics.

Other gold ETFs are also available, giving investors differing exposure to the precious metal. For example, the VanEck Gold Miners ETF AUD (ASX: GDX) uses the money raised from its investors to buy shares in some of the largest gold mining companies in the world.

Why invest in ASX gold shares?

Adding some gold shares to your portfolio can provide great diversification benefits. Investors see gold as a safe-haven asset, so it tends to preserve its value even during a bear market or recession.

This means that gold exposure can help to protect your portfolio from significant losses during a market downturn. When shares and other risky assets fall, investors may start putting their money into gold, driving up its price. So, your gold shares may rise when the prices of most of your other stocks are falling.

Top gold shares on the ASX

The biggest gold miner on the ASX used to be Newcrest Mining Ltd. It was acquired in late 2023 by global mining giant Newmont in a deal valued at a whopping $26 billion. This was massive news in the Australian mining industry, with Newcrest having been an ASX stalwart since 1987.

Newcrest shareholders received 0.4 Chess Depository Interests (or CDIs) in the newly merged entity Newmont Corporation (ASX: NEM) as part of the deal. They received CDIs (and not 'shares') because Newmont is an American company listed on the New York Stock Exchange.

From an investor's perspective, Newmont CDIs trade on the ASX like any other share. But they are technically a slightly different financial instrument, giving the holder ownership rights over shares of Newmont (on a one-to-one basis), trading on its primary exchange in New York. 

The Australian Securities Exchange (ASX) created CDIs to overcome differences in trading rules between countries. This makes it easier for foreign companies to access Australian markets for financing. 

The CDI structure isn't new – US companies like Block Inc (ASX: SQ2) and Resmed Inc (ASX: RMD) already use CDIs to trade their shares on the ASX. 

At any rate, Newcrest was delisted from the ASX in October 2023 and replaced by Newmont in early November. This makes Newmont the biggest gold miner on the ASX, with a market cap of $65 billion. The next biggest, Northern Star Resources, has a market cap of just $13 billion.

Here, we profile three gold shares ranked in order of market capitalisation from highest to lowest.

Newmont Corporation

One of the largest gold mining companies in the world
Northern Star Resources Ltd

Large mining company with projects in Australia and the

United States
Global X Physical Gold

A commodity ETF backed by physical gold


Based out of Greenwood Village, Colorado, global mining giant Newmont is the biggest gold miner in the world. Especially after gobbling up leading Australian gold miner Newcrest in October 2023. 

Newmont operates in Africa, Australia, North America, Latin America, the Caribbean and Papua New Guinea. The company also produces copper, zinc, lead and silver, but its fortunes rest on gold, with a portfolio that includes more than half of the world's Tier 1 mining assets.

Because its portfolio is heavily weighted towards gold mining assets, the company's share price tends to move closely with the gold price. This means that an investment in Newmont can provide many of the same benefits as an investment in gold itself – potentially making it an excellent defensive share to add to your portfolio.

Northern Star

The next largest ASX gold miner is Northern Star, which operates in Western Australia and the United States. It isn't as large or as diversified as Newmont, meaning it might be slightly higher risk. This is because it relies more heavily on the success of a small group of mines for its profits. So, if one of them stops producing, for whatever reason, it can hurt Northern Star's bottom line.

That being said, Northern Star has increased its production significantly over recent years, and is midway through its five-year growth strategy.

By FY26, Northern Star is targeting the production of 2 million ounces of gold per annum by optimising its existing mines and undertaking new exploration projects. Given the company's policy of returning between 20% and 30% of its cash earnings to investors as dividends each year, it has also been an excellent little earner for income investors.

Global X Physical Gold

As we've already mentioned, Global X Physical Gold is a commodity ETF designed to track the price of gold itself. An ETF like this is the best way for investors to gain exposure to gold, short of buying the actual bullion themselves.

The fund is backed by physical gold bars stored in a vault in London. This means that a unit in the fund is essentially equivalent to an ownership stake in real gold, ensuring its unit price remains highly correlated with the gold price.

This makes it the best option for investors seeking exposure to the gold price without any company-specific risks from investing in a gold miner or exploration company.

What might the future look like for ASX gold stocks?

Throughout history, gold has proven itself a strong and stable investment, and there's no reason to doubt it won't continue to do so in the future. This means that investing in gold will likely remain a good way to hedge against the risk of a recession.

However, gold prices will likely remain subdued in the short term if central banks continue to hike interest rates to curb inflation. In a rising rate environment, investors may choose to invest in newly issued high-quality government bonds rather than gold. Both assets are considered safe havens in risky environments, but bonds pay interest (whereas an investment in gold does not), which can become much more attractive as rates rise.

So, despite high inflation and extreme volatility in equity markets, investors sometimes prefer to put their money into bonds rather than gold.

However, this shouldn't detract from gold's long-term effectiveness as an inflation hedge.

Benefits of investing in gold shares

Investing in gold stocks can provide many of the same benefits as a direct investment in physical gold. Let's look at some of the main positives.

Diversification: We've already mentioned the diversification benefits you can gain from investing in gold. Gold is typically somewhat immune to falls in the share market, making it a great way to protect your portfolio from significant losses in a downturn.

Low price volatility: The price of gold is relatively stable over time and doesn't fluctuate as much as share prices. This can give you some peace of mind when share markets are volatile.

Inflation hedge: Rising inflation can quickly erode the value of your investments. However, gold has historically outperformed inflation, providing an excellent store of value.

And the cons?

Low-returning: Gold has proven to be a stable store of value over time. This typically makes it a low-risk, low-returning asset. This means its value is unlikely to increase suddenly, like some growth shares might.

Company-specific risks: Depending on the type of gold share you invest in, you may be exposed to other risks apart from the price of gold. For example, production costs for certain miners may increase, negatively impacting profits. Or a mining exploration company may run out of capital and abandon operations.

Are ASX gold stocks a good investment?

Just about every portfolio can benefit from exposure to gold because of how effective a diversifier the precious metal can be. Investors often see gold as the best defensive asset to hold, helping to minimise losses in a market downturn.

However, not all ASX gold shares are the same. ETFs like the Global X Physical Gold ETF track the price of gold quite closely. Shares in junior miners like Gold Road Resources Ltd (ASX: GOR), with significant unproven exploration projects, can sometimes perform markedly differently from gold.

Which is right for you depends on your risk tolerance and investing objectives.

Frequently Asked Questions

Most investors would benefit from having a small portion of their portfolio invested in gold. Gold is traditionally viewed as the (ahem) gold standard in safe-haven assets – meaning it tends to preserve its value, even during a recession. Gold exposure can help protect your portfolio from significant losses in a bear market. When the prices of shares and other risky assets become especially volatile, investors often move their money into safer assets, including gold. This means the price of gold usually rises when share prices fall -- providing excellent diversification benefits to an equity portfolio.

Thanks to exchange-traded funds like Global X Physical Gold (ASX: GOLD), investing in gold has never been easier for beginner investors. ETFs trade on the share market much like ordinary shares but are pooled investment vehicles. This means they take the money they raise from their investors and use it to buy assets. In the case of Global X, it uses its investor funds to buy gold bullion. So, if you purchase units in Global X, you're buying an ownership stake in a pile of gold locked away in a vault in London. You can even redeem your holdings for physical gold if you want to. ETFs like this provide everyday investors with cheap and easy access to gold. But there are also other affordable options depending on the exposure you'd like to the gold market. Investing in gold miners, smaller gold exploration companies or even large mining companies with diversified revenue streams is possible. 

Gold is an excellent addition to almost any portfolio. It can help you manage risk exposures and limit losses in a recession or bear market. However, how much gold exposure is right for you depends on your personal risk tolerance. Although it has proven to be a good store of value, gold has a lower return than other assets, which means it may not suit growth-oriented investors. And not all gold stocks are the same. Gold ETFs and large pure-play gold miners may track the price of gold quite closely – but the prices of other gold stocks, like junior miners, exploration companies, and miners producing a few different commodities, may move about for all manner of reasons. This makes some gold stocks more effective than others – which you should keep in mind if you want to add gold to your portfolio.

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

As always, remember that when investing, the value of your investment may rise or fall, and your capital is at risk.

Motley Fool contributor Rhys Brock has positions in Block and Northern Star Resources. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block and ResMed. The Motley Fool Australia has positions in and has recommended Block and ResMed. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.