Trade in gold mining companies is booming today as the market responds to North Korean missile fears. This morning, according to media reports, North Korea launched a missile that passed over Japan before crashing into the ocean.
Such a move is expected to be destabilising, given the recent heated dialogue between great powers over that area of Asia. Investors typically flock to gold in times of stress, as we saw today:
Resolute Mining Limited (ASX: RSG) – up 6% to $1.12
Northern Star Resources Ltd (ASX: NST) – up 4% to $5.17
Newcrest Mining Limited (ASX: NCM) – up 2% to $22.86
Millenium Minerals Ltd. (ASX: MOY) – up 7% to $0.19
Some other well-known miners barely budged, with Evolution Mining Ltd (ASX: EVN) rising just 1% to $2.22.
While gold will always remain popular in times of uncertainty, investors need to be aware that there is a distinct difference between owning a gold miner and owning physical gold. Some miners have large stockpiles of gold in storage and on site, which may be attractive. Yet other miners carry significant amounts of debt and rely on ongoing demand for gold to service their debt and justify the value of their share price. Company share prices may be too high to offer much protection, for example.
War has been traditionally 'bearish' for money – as in, war causes the value of cash to drop – which is why many investors look to buy gold or other similar assets in wartime. However, there's no point buying a gold miner to hedge against war only to find that the war doesn't occur and you lost 40% of your investment because your miner was overpriced or a poor prospect.
A number of prominent investing gurus (who actually lived through major wars) like Warren Buffett and Phil Fisher have useful views on investing in wartime, and would be my first go-to suggestion for readers.
