ASX-listed gold miners have been killing it in the first four months of 2016, a welcome change after a poor year in 2015. Shares in EVOLUTION FPO (ASX: EVN) are up a massive 29% so far this year, while Northern Star Resources Ltd (ASX: NST) is up a massive 33%.
However before jumping into gold mining shares today, here are three things that you should be aware of:
1. Analysts reckon the gold price could keep climbing
A sample of analysts questioned by Bloomberg think that negative real interest rates will keep investors hungry for gold as an investment in the short term. Negative real interest rates means that inflation is higher than the interest rate you can earn on your cash savings, which erodes your spending power over time.
This is driving demand for gold which is widely regarded as way to protect against inflation.
2. Yes, the price of gold was being manipulated
It's a sad truth that anywhere people are motivated by money, rules will be broken in the name of self-interest. We saw this emerge in various forms after the global financial crisis, we saw it with the rigging of LIBOR interest rates, and now we've seen it in gold.
According to Reuters, Deutsche Bank AG has reached a settlement on a U.S. lawsuit regarding allegations it was involved in price manipulation for gold and silver.
Until recently the price of gold was set by an 'afternoon fix' – a private conference call between big banks which researchers noted showed signs of manipulation and collusion.
3. Newcrest Mining Limited (ASX: NCM) is hitting 3-year highs
Its shares have risen 27% in the last 12 months, while the spot price of gold has risen only 5% in U.S. dollar terms over the same time (although the Aussie dollar is also down slightly over the same period which helps).
Low production costs, a rising gold price and strong production have been fueling investor expectations for a significant rise in earnings this year.
