Shares in ASX gold miners including Newcrest Mining Limited (ASX: NCM) and Evolution Mining Ltd (ASX: EVN) have tumbled lower today after the spot price for gold fell almost 2% overnight.
Why Are Share Prices Falling?
Newcrest, Australia’s largest gold miner, closed down nearly 4% today seemingly in reaction to the fall in the gold price overnight. Newcrest was not alone, with many of its gold miner peers also experiencing hits to their respective share prices. Northern Star Resources Ltd (ASX: NST) shares ended the day 4% weaker, while Silver Lake Resources Limited (ASX: SLR) closed more than 5% lower.
A move of 2% in the spot price of gold does very little to affect the underlying performance of our listed gold miners. However, investors tend to be reactionary and as a result, the share prices of the various miners will fluctuate along with the gold price.
Looking at the bigger picture, we can see that the gold price is up more than 35% this year in Australian dollar terms. This has predictably led to a strong surge in gold stocks on the ASX, with many enjoying their best run in several years.
What’s Next For The Price Of Gold?
The honest answer is I don’t have much of an idea. Unfortunately, gold is one asset that is particularly hard to value, one of these reasons being because it is an asset almost devoid of any intrinsic value. Most investors either speculate in gold or use it as a type of quasi-insurance against a financial crash.
I’m not against investing a small percentage of one’s portfolio in gold, especially given the diversification benefits that it can bring. However, I would be cautious not to make it too large of a weighting in a portfolio given the unpredictability of the underlying asset.
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Disclosure: At the time of writing, the author of this article has no financial interest in any of the companies mentioned.
