Could gold fall to $1,000 per ounce?

Are mining stocks such as Newcrest Mining Limited (ASX:NCM), Northern Star Resources Ltd (ASX:NST), OceanaGold Corporation (ASX:OGC), Troy Resources Ltd (ASX:TRY) and Medusa Mining Limited (ASX:MML) worth it?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Last week I wrote that investors in gold miners had an outside chance of witnessing a healthy boost to share prices early this week.

The potential for a jump in the gold spot prices would've came from the 'Save Our Swiss Gold' referendum yesterday. The vote on increasing gold reserves at its central bank to 20%, from approximately 7% currently, would mean the Swiss National Bank (SNB) would hold $540 billion of gold on its balance sheet.

However the initiative was shot down in dramatic fashion, with 77% of voters against the idea.

Looking forward, some analysts believe the gold price could again test its recent four-year low of $US1,132 per ounce as prospects for rapidly increasing inflation subside.

What this means to Aussie miners

Although the 'no' vote will have a more pronounced effect on gold miners, the spot price – down 1.3% to $US1,152 per ounce today – isn't likely to come under immediate selling pressure.

However the results of the Swiss vote are yet another faded hope for Australian gold mining investors.

Indeed shares of Australia's two largest gold miners Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) are down 5.22% and 11.9%, respectively, in early morning trade.

Smaller miners OceanaGold Corporation (ASX: OGC), Troy Resources Ltd (ASX: TRY) and Medusa Mining Limited (ASX: MML) are down 13.8%, 9% and 8.5%, respectively, at the time of writing.

Are mining stocks cheap?

A reasonable estimation of the intrinsic value of gold mining stocks requires analysts to make four difficult guesstimates:

  1. Future gold prices (which includes an understanding of global markets, inflation etc.)
  2. Costs of production across the life of a mine
  3. Value of reserves and resources
  4. Success in exploration activity

Then there's the usual risks and uncertainties inherent to investing in public companies such as competent management and financial health (including capital management).

When all of these assumptions combine, individuals could earn a living from investing in gold. However, it's important for average investors to remain within their circle of competence as often as possible, if not always. And with some analysts saying gold could reach $US1,000 per ounce, investors would be wise to tread carefully.

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.  

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »