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.
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.