The S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is being dragged lower by falling commodity prices and weak leads from international markets overnight. Crashes in oil and iron ore prices saw major US and European markets sold off as investors' fears over China were reignited.
With Australia's own ASX 200 down around 7.3% in 2016, so far, it appears uncertainty is everywhere. Investors are worried about the consequences of 11-year lows in oil prices (personally, I'm just thankful for the cheaper petrol prices).
A winding down of the mining boom also appears to have rattled economies dependent on raw material exports, such as Australia, South Africa and Canada. While almost everyone is fretting the consequences of a slowing Chinese economy.
Step up, gold shares
Unsurprisingly, the vast majority of shares outperforming on the ASX today are gold miners.
- Northern Star Resources Ltd (ASX: NST) – up 6.75%
- EVOLUTION FPO (ASX: EVN) – up 6.45%
- Newcrest Mining Limited (ASX: NCM) – up 4.86%
- Regis Resources Ltd (ASX: RRL) – up 4.07%
Gold miners (or just gold more broadly) are often perceived as a 'hedge against uncertainty'. It's a self-reinforcing perception that has worked for speculators in the past, during hard times like the Global Financial Crisis (GFC).
However, while speculating on rises in gold prices is risky, betting on a rise in gold shares is even riskier. In my opinion, gold has no place in an investor's portfolio for anything other than speculation. And even if you do speculate on gold, it's probably not worth the risk or the effort.
