Gold rebounds to 5-week high; ASX gold stocks surge

Gold miners have seen their share prices surge today.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published October 23, 2013 3:35 pm AEDT

The gold price jumped above $US1,340 an ounce today as disappointing jobs data out of the United States led investors to believe that the much anticipated tapering of the Federal Reserve's monetary stimulus policy may not start until the second-quarter of next year.

Paradoxically, the disappointing jobs data saw US and global stock markets rise, hooked as they are on the supply of easy money. Further stimulus into 2014 would support asset prices, including physical gold and stocks. The jobs report itself was delayed more than two weeks, thanks to the US government shutdown that ended October 16.

In Australia several gold miners have seen strong rebounds today, as investors go bargain hunting among gold stocks that have been heavily sold off in 2013.

Newcrest Mining (ASX: NCM) has been up around 5% in trade today, while smaller player Silver Lake Resources (ASX: SLR) has jumped more than 13%. Kingsgate Consolidated (ASX: KCN) has also been up more than 7% in trade today.

The economic damage from the recent U.S. government shutdown has yet to become clear and further signs of weakness in the US and global economy will support the gold price. The Australian dollar has also been steadily appreciating against the US dollar, as signs of weakness in the US economy see the US dollar fall to an 8-month low against a basket of global currencies.

Foolish takeaway

Gold is notoriously difficult to value, and its primary investment value is as a hedge against inflation. It has been in a long-term downtrend for the past two years but investors who believe it has reached fair value or below could look to profit from some of the listed gold miners in Australia.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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