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%.
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- 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.
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