The price of gold zoomed upwards overnight, as investors bet the US Federal Reserve won't raise interest rates for some time. Spot gold gained US$23.43, or 2% to trade at US$1,202.43 an ounce.
And our Aussie gold miners are benefitting today with most posting strong gains in late afternoon trading.
Resolute Mining Limited (ASX: RSG) was up 10.3%, Beadell Resources Ltd (ASX: BDR) 6.8%, St Barbara Ltd (ASX: SBM) 6.7% and Northern Star Resources Ltd (ASX: NST) 5.3%. Perseus Mining Limited (ASX: PRU) had gained 5.5%, while Saracen Mineral Holdings Limited (ASX: SAR), Teranga Gold Corp (CDI) (ASX: TGZ), Evolution FPO (ASX: EVN), Regis Resources Limited (ASX: RRL) and Newcrest Mining Limited (ASX: NCM) and Medusa Mining Limited (ASX: MML) had all added more than 3%.
That's not bad when you consider that the S&P/ASX 300 (Index: ^AXKO) (ASX: XKO) was down 0.5%.
As always though, the miners are totally dependent on three main factors:
- The gold price and where it is going.
- The Australian dollar / US dollar exchange rate, and
- Their all-in-sustaining costs (AISC).
If US interest rates stay low for longer than expected, then the gold price should continue to trade around these prices. There's no certainty of course, as the precious metal's price can be pushed up or down by myriad factors. But at some stage, the US Fed is likely to begin raising interest rates. As soon as that occurs, the gold price is likely to take a hit.
Offsetting that factor could be a fall in the AUD/USD exchange rate. As US interest rates become more attractive, more investment tends to flow into the US and drive up the US dollar – and hence drive the Aussie dollar down.
The one main factor that the gold miners can control – their production costs – can also fluctuate heavily from quarter to quarter. But as long as they can keep the costs under A$1,200 an ounce, they should be able to produce some decent results. Of the miners mentioned above, my pick would be Northern Star – which even comes with a dividend!
