Aussie Gold Stocks Race up After Fed Hike

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]


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. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money