The S&P/ASX 200 (ASX: XJO) has started the week in the red, down 0.6% to 5,871.9 points, whilst the broader All Ordinaries Index is similarly down 0.5% to 5,940.9 points.
However, shares in several big gold miners including Regis Resources Limited (ASX: RRL), St Barbara Limited (ASX: SBM) and Saracen Mineral Holdings Limited (ASX: SAR) have all charged more than 5% higher as gold prices have reached their highest point since June 2018.
Why are ASX gold miners charging higher?
Globally, gold prices have continued to rise ahead of the US Federal Open Market Committee's (FOMC) January meeting. Whilst the Fed is expected to keep interest rates on hold, market expectations surrounding the Fed's quantitative tightening (QT) regime has led to the most recent spike in gold prices to over US$1300 per ounce.
The Fed has been gradually unwinding its $4.5 trillion balance sheet as it seeks to reverse the effects of its quantitative easing (QE) program it began in the midst of the Global Financial Crisis (GFC) back in 2008/09.
Should Chairman Jerome Powell and Co. choose to slow the balance sheet unwind, this would be expected to send the US dollar lower, which has caused a flight to the traditionally safe-haven asset class of gold.
Today's gold price is sustained just above the US$1300 per ounce threshold ahead of the FOMC meeting, which has triggered today's early surge in ASX gold miners.
Leading the ASX200 gains amid an otherwise disappointing day for Australian equities, the Regis share price is up 5.92%, the St Barbara share price is up 6.47% and the Saracen share price has risen 5.10%.
Foolish Takeaway
Whilst the major ASX gold miners have been buoyed by the higher, sustained gold price in early trade, I still wouldn't consider them a buy. Given the cyclicality of the sector and the expectation of further balance sheet reduction by the Fed, I think gains for these miners will be temporary. Within the metals and mining sector, I prefer Syrah Resources Ltd (ASX: SYR) from a growth perspective with a more supportive technical environment.
