ASX gold shares have largely been trailing the broader market this year.
The gold price dropped another 0.2% overnight and is currently at a 10-week low of US$1,757 (AU$2,343) per ounce. That's now down 15% from the US$2,064 that same ounce was worth on 6 August.
With gold edging lower again, most ASX gold shares finished the day down.
Newcrest Mining Ltd (ASX: NCM), for example, was down 1.6% to $25.28 per share.
Evolution Mining Ltd (ASX: EVN) slipped 0.66% to $4.50 per share.
And Northern Star Resources Ltd (ASX: NST) was down 1.51% to $9.78 per share.
But according to Saxo Market's Ole Hansen, head of commodity strategy, gold could be in for a rebound, offering some welcome tailwinds to ASX gold shares.
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The bullish case for gold
In Saxo's Q3 2021 Quarterly Outlook report, Hansen said:
It's our view that rising inflation is likely to be longer-lasting than transitory, thereby creating continued demand from investors as they will need real assets such as commodities to hedge their portfolios.
Combining this with our overall negative dollar view, precious metals – both gold and silver – should continue to attract demand, especially if an expected rise in Treasury yields are driven by rising inflation expectations, thereby preventing real yields from rising too far.
That's Saxo's mid-term view.
Citing short-term risks for the gold price, and hence ASX gold shares, is Carsten Fritsch, an analyst at Commerzbank AG.
According to Fritsch (as quoted by Bloomberg):
Gold repeatedly failed to overcome the 100-day moving average in recent days, which was a bearish sign. There is a risk now that so far patient ETF investors jump on the bandwagon and sell their holdings. This would amplify the downward move.
With ASX gold shares heavily influenced by the price of the yellow metal they dig from the ground, investors will be eyeing the price moves closely.
If Saxo's Hansen has it right and gold continues to attract demand in the upcoming quarter, it may prove an opportune time to buy the dip.
How these ASX gold shares moved this year
All 3 of the ASX gold shares listed above are in the red for the past 12 months.
The Northern Star Resources share price is down 27% over 12 months and down 23% year-to-date.
The Evolution Mining share price is down 20% in 12 months and down 10% so far in 2021.
And the Newcrest Mining share price is down 20% since this time last year and down 2% year-to-date.
