Gold miners soar as US interest rates on hold for longer

Concerns over global growth means US interest rates on hold for longer

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published March 30, 2016 10:54 am AEDT

The US Federal Reserve delivered shareholders in gold miners a nice bonus overnight, signalling that interest rates would remain on hold amid uncertainty over global growth.

The spot gold price gained 1.4% to US$1,239.35 an ounce overnight, but the likelihood of low interest rates for longer means gold is likely to retain its status as a safe haven.

Rising US interest rates would likely mean a rising US dollar, and more demand for US dollar-priced assets such as fixed interest securities, bonds and the like, and less demand for gold.

Continued global uncertainty also means investors are more than happy to retain their gold holdings and even shift some of the portfolios to the gleaming metal.

At the start of trading on the ASX, the S&P/ASX All Ords Gold (Index: ^AXGD) (ASX: XGD) had jumped more than 5%, recovering the losses from last Thursday, but still down for the week. Among the miners, Beadell Resources Ltd (ASX: BDR) had soared 11.5%, Resolute Mining Limited (ASX: RSG) was up 9.8%, Troy Resources Ltd (ASX: TRY) 9%, Kingsgate Consolidated Ltd (ASX: KCN) 8.5% and Evolution FPO (ASX: EVN) up 5.7%.

Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) were up 5.2% and 5% respectively.

Working against Australian-based miners is the soaring Australian dollar – which is currently buying around US 76 cents. As the Aussie dollar rises, the miners receive less for selling their gold in US dollars.

Foolish takeaway

Gold miners are making a motza at the moment with the Australian dollar price of gold at around A$1,630 an ounce and average all-in sustaining costs of between $1,000 and $1,100 an ounce. Unfortunately for investors, the share prices of many gold miners reflect that potential.

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