ASX shares haven't been the only market rallying this year. Gold continues to impress, setting a series of record highs since January.
And with gold prices climbing to record highs above US$2,700 per ounce, attention has now shifted to the gold miners.
Gold players like Newmont Corp (ASX: NEM) and Northern Star Resources Ltd (ASX: NST), along with others, could be well positioned to benefit from the soaring price of gold.
That is, if operating costs for the mining giants remain under control.
With demand for safe-haven assets surging, the question is, can ASX gold shares keep delivering the goods? Let's see what the experts say.
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Gold extends to new highs
Gold hit a new all-time high of US$2,754 per troy ounce on October 23 and has since retreated to its current range of US$2,732 per troy ounce.
Several catalysts have brought the yellow metal to its new highs.
Earlier in the year, there were waves of buying from global central banks looking to diversify their foreign exchange reserves.
Most recently, the US Federal Reserve's recent hints at lowering interest rates were the catalyst driving higher prices. Expectations of more rate cuts have provided another major tailwind.
Bank of America analysts noted that "lower interest rates make gold more attractive as a non-yielding asset", pointing out that gold pays no interest or income.
Investors piled more than US$3 billion into gold funds last week, Bank of America says, further pushing prices.
The bank forecasts that gold could reach US$3,000 within a year, according to Bloomberg.
Ongoing tensions in the Middle East have also boosted demand, with investors hedging against potential escalations.
Citi analysts note the current spate of geopolitical risks, adding that "safe-haven assets like gold remain in favour".
The broker also raised their gold price forecast to US$2,800 by the end of the year, noting:
[G]old should continue to perform well as the U.S. economy remains in a late-cycle phase, with further labour market pressure and slowing economic growth.
Meanwhile, JP Morgan analysts note that global demand for the precious metal remains high, which could lead to higher prices moving forward.
It said gold is a "cornerstone" with risks of inflation and market volatility, which could impact ASX gold shares.
Finally, analysts at Commonwealth Bank of Australia (ASX: CBA) have chimed in and see a price of AUD$4,102 per ounce. At the time of writing, this equals about US$2,700 per troy ounce.
It is "particularly surprised" to see gold rally alongside the US dollar this year.
What does this mean for ASX gold shares
With all the fever in gold prices, you'd expect to see ASX gold shares flying.
But it's not all that simple for the gold miners. For a hypothetical gold miner, all else being equal, the holy grail is the combination of soaring gold prices and declining operating costs.
Newmont, one of the largest global gold miners, recently posted its quarterly numbers. Profits were above $920 million, boosted by higher gold prices. Much of this was largely anticipated.
But it was the market's reaction to the earnings result that took many by surprise.
"Higher-than-expected costs…weighed on results", said Steven Green, an analyst at TD Cowen, according to Seeking Alpha.
Newmont's Q3 all-in sustaining cost rose to US$1,611 per ounce, which, despite higher gold prices, affected the ASX gold stock's profitability. Shares sold off sharply on the day. Tough gig, being an ASX gold stock.
Meanwhile, Northern Star, which focuses on Australian operations, appears well-positioned to benefit from the gold price rally.
Jeffries and Morgans rate it a buy, with the latter seeing value in Northern Star's Kalgoorlie Consolidated Gold Mines (KCGM) expansion.
The broader picture looks promising. Rising demand, supply challenges, and central bank buying paint a bullish outlook for gold.
Foolish takeout
Experts say that ASX gold shares still might be attractive plays for investors seeking shelter from market turbulence.
With gold prices soaring and demand at record levels, these companies stand to benefit from the sustained demand for gold.
But it's not all that simple. A more detailed look at operating costs and sustaining costs is needed to get the full picture.
Time will tell what gold and ASX gold stocks do from here.
