The ascent of companies like Barrick Gold, AngloGold Ashanti and Acacia Mining reportedly marks a turnaround from recent episodes of jittery markets, The Wall Street Journal reported.
Investors are known to flock to the tradition safe haven of gold, and when that happens, gold-mining stocks tend to do even better.
Companies like Toronto’s Barrick Gold Corp., South Africa’s AngloGold Ashanti and Acacia Mining are all up around 15% to 19%, WSJ.com reported.
Investors have poured $278 million into the VanEck gold miner ETF over the past month, according to FactSet, while flows into EPFR-tracked gold funds climbed to an 11-week high last week.
Gold-miner stocks allow investors to double down on bets the gold price will rise. These companies have higher fixed-investment costs and can become much more profitable when gold prices climb. Many of these companies pay out hefty dividends, too.
“Given the strength of the U.S. dollar we’ve seen and slight concern now about the fiscal position in the U.S. following stimulus measures and tax reform, there’s some concern around the U.S. dollar as an ultimate safe haven,” said Roger Jones, head of equities at London & Capital.
Jones explained that the recent market plunge has been “more about a growth scare than February-March, when it was more about a rate-hike scare.”
Jones predicted that “if there’s another slowdown in growth, gold-mining stocks will be at the forefront of investors’ minds” as they look for shelter and safety.
To be sure, gold prices edged up on Friday, on course for a third week of gains as weaker stock markets spurred investors to seek refuge in bullion, which also gained technical momentum after scaling major milestones.
Spot gold added 0.3 percent to $1,228.51 an ounce by 1252 GMT. The metal has gained 0.9 percent this week and hit a 2-1/2-month high on Monday at $1,233.26, Reuters explained.
U.S. gold futures were steady at $1,229.80.
“Gold has done really well to hold up here, given the Fed was really hawkish. Sensitivity to equity markets is helping gold at the moment,” said Macquarie commodity strategist Matthew Turner.
“We are entering a new paradigm, where any further rate hike could be a sign that the economy is overheating a bit, which should be more positive for gold and problematic for equities,” Turner told Reuters.
Elevated geopolitical risks and pressure on equity markets have created a supportive setting for gold buying, said Deutsche Bank metals strategist Nicholas Snowdon.
The recent sell-off in global stock markets has boosted the appeal of gold, which is often viewed as a safe store of value during political and economic uncertainty.
“Today’s attempt by gold to lastingly exceed the 100-day moving average looks promising. If it succeeds, technical follow-up buying should push the gold price further up,” Commerzbank analysts wrote.
“At the same time, gold is resisting the firm U.S. dollar. It is finding support from increased risk aversion among market participants, as reflected in falling stock markets, and from additional ETF (exchange-traded fund) inflows.”
Holdings of the SPDR Gold Trust, the largest gold-backed ETF, have gained 2.5 percent in the past two weeks.
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