A record June quarter production result was not enough to push gold miner Northern Star Resources Ltd (ASX: NST) into the black although I don't think shareholders should be complaining, and I'll explain why later.
The stock was trading flat at $2.20 in the face of a broad-based market sell-off this morning with even Australia's largest listed gold miner Newcrest Mining Limited (ASX: NCM) struggling to gain traction on the back of the overnight rise in the gold price.
Perhaps much of the good news is already reflected in Northern Star's share price as the stock is up close to 50% since January.
Regardless, Northern Star probably hasn't won over enough new supporters on the back of its strong June production performance. It saw the miner sell 152,447 ounces of gold in the period to take normalised free cash flow for the financial year to end June to $183 million.
Both figures are a record for the company although detractors will point out that the result means full year production of 580,784 ounces is somewhere in the middle of management's guidance, and that's not reason enough to bid the stock higher.
Interestingly, other gold producers like Doray Minerals Limited (ASX: DRM) and Saracen Mineral Holdings Limited (ASX: SAR) have also failed to excite investors with their record quartiles.
Is the sector running out of puff?
While there's certainly reason to think that the pause is healthy given the outperformance of the sector this calendar year, there's reason to think there is more upside than downside risk to the share prices of gold stocks.
The fact is, the tailwinds supporting the sector are not about to fade anytime soon and there's little in the way of macro headwinds.
The threat of Greece being thrown out of the European Union (EU) has been one big supportive factors for gold as confidence in the European common currency takes a beating, and worries about the future of the Euro aren't about to disappear even if Greece finds a way to stay in the union (and that's a BIG "if"!).
It's kicking the can down the road and investors know it will be only a matter of time before EU solidarity is tested again.
Much of the same can be said for China's potential asset bubbles in stocks and property as authorities are treating the symptoms and not the causes.
But perhaps the biggest supportive factor for gold stocks is the weak Australian dollar, which is boosting the appeal of miners, particularly those running domestic operations like Northern Star and Saracen.
Gold is sold in US dollars while most of the costs for these miners are priced in Australian dollars.
Some analysts think this will entice offshore miners to run the ruler over domestic gold companies as the general lack of exploration success means it is probably cheaper for overseas bidders to buy gold miners here, even if they have to pay a "takeover premium" for these stocks.
