Aussie Gold Stocks Race up After Fed Hike

gold and the stock market

Perseus Mining Ltd [ASX:PRU], Silver Lake Resource Ltd [ASX:SLR] and Saracen Mineral Holdings Ltd [ASX:SAR] all opened higher this morning. PRU climbed 10.45%, to 37 cents; SLR jumped 8.4%, to 64.5 cents; and SAR rose 7.61%, to $1.06.

All three stocks share one thing in common. They’re all gold stocks. And they weren’t the only ones which climbed this morning.

What happened to these Aussie Gold Stocks?

Overnight, the price of gold rose from US$1,201.77 an ounce to US$1,220.56 an ounce.

This is great news for gold miners, as the price of gold directly affects profitability.

Why did gold rise so suddenly?

Many believe gold rose on the US Federal Reserve’s decision to raise rates 0.25%, to 0.75–1.00%. Yet this doesn’t make much sense. The Fed only lifted interest rates to control inflation from running up. This would suggest the US economy is in good shape, a factor which makes gold less desirable to investors.

However, rising rate caused the US dollar to fall. This made gold, in US dollar terms, rise, as it would take more US dollars to buy an ounce of gold.

What now for the Gold Price?

Like any commodity-related business, their share price is tied closely to the fluctuations of the commodity they produce. Hence, if you think gold will rise in the long term — signalling economic turmoil — you might want to think about adding gold stocks to your portfolio. Otherwise, look elsewhere to invest.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s possible that you won’t see another turnaround in resources like we did in 2016. And if we do, you could be waiting a while. Unless commodity prices suddenly move higher, earnings will likely stagnate.

That’s why some investors prefer the smaller end of the market.

Smaller miners are a riskier investment, there’s no running away from it. But they could potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.

In his advisory service, Resource Speculator, Jason has made gains of 142%, 145% and 242%.

To find out more, click here.

[ampBannerDR]

Free report reveals:

Don’t Buy ANY Gold Stocks Until You Read This
Markets & Money Free ReportIn this brand new report, resource expert Jason Stevenson reveals why it’s not the time to buy gold stocks…yet.

Download this free report now and discover:

  • Why the gold ‘bear’ is set to bite again: What goes down, must go…down. As Jason explains, the gold crunch that kicked off in 2011 may not be over after all. In fact, gold’s plunge may be about to ramp up again. Find out why the precious metal could fall well below US$1,000 in the months ahead.
  • The uncut truth on gold: Despite what you might hear, the supply and demand story for gold remains gloomy. But not for much longer. As you’ll see, one specific signals points to a potential bump in demand for the precious metal.
  • Patience the key to big gold gains in 2017: Gold and gold stocks will eventually bounce back. But not right now. Jason reveals when you should jump back into gold, and why patience could pay off big time in the next few years.

To download your copy of Why You Should Wait to Buy Gold Stocks in 2017, take out your free subscription to Markets & Money. Simply enter your email address in the box below and click ‘Send My Free Report’.

We will collect and handle your personal information in accordance with our Privacy Policy.

You can cancel your subscription at any time.

Härje Ronngard

Härje Ronngard

Harje Ronngard is a Junior Analyst at Markets and Money.

With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation.  

Leave a Reply

Be the First to Comment!

Notify of
avatar
wpDiscuz
Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au