Leading Australian gold mining shares like Northern Star Resources Ltd (ASX: NST), Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN) have all edged higher in Friday trade as investors continue to seek the safety of gold due to geopolitical tensions.
The rising tide lifting the miners is the gold price that hit a 52-week high this afternoon of US$1,359 as the prospect of a war on the Korean peninsular continues to fuel the flight to safety.
Another factor supporting the gold price is the falling U.S. dollar that is now down around 10% against a basket of other currencies over the course of 2017. As the U.S. dollar falls gold becomes relatively cheaper to non-US dollar denominated investors, which may increase the demand for it as a hedge against geopolitical uncertainty.
The falling U.S. dollar is also indicative of the fact that markets are paring back expectations as to the timing of cash rate hikes in the U.S. As cash and money market rates rise gold becomes less attractive as an investment due to its failure to pay an income, but with investors now pricing in lower short-term interest rates, gold is again rising.
Over the past year gold is in an uptrend, but over the past 5 years it has been sliding as the U.S. economy strengthens and it may be an asset class for long-term investors to avoid.
