It's hard to know if ASX gold shares like Newcrest Mining Limited (ASX: NCM) are in the buy zone.
Many of Australia's top gold miners have seen their values surge in 2020 as investors have looked for a safe haven away from the coronavirus pandemic-induced volatility.
So, as markets continue to move, is there still time to buy ASX gold shares?
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Why ASX gold shares are still a good buy
It's important to distinguish between strategic and tactical investing. Investors should generally have a long-term view towards investing and portfolio construction.
However, that doesn't mean there can't be short-term deviations from the plan to capitalise on good opportunities.
The Newcrest share price has jumped 9.8% in 2020 while the S&P/ASX 200 Index (ASX: XJO) has fallen 12.1% lower.
It's even better news for investors in some of the other large ASX gold shares. The Saracen Mineral Holdings Limited (ASX: SAR) share price has surged 56.6% higher this year thanks to strong investor demand.
I'm not personally a big investor in ASX gold shares. However, some pure play shares can provide some benefits within a diversified portfolio.
One is a downside hedge of sorts given gold prices often push higher amid market volatility and bear markets. These stocks could also provide some protection through a higher gold price if we see inflation start to rise in 2021.
I think investors still need to be careful when picking tactical investments, especially at the moment. I personally prefer to buy those with strong cash flow generation like Saracen rather than some of the prospectors.
Foolish takeaway
It's easy to think that ASX gold shares are overvalued in the current market. However, with bond yields at all-time lows and other defensive shares also surging, there aren't a lot of options for downside protection.
I wouldn't say gold is the ultimate defensive share but it may provide some benefits if we enter another bear market or a period of high inflation.
