ASX gold shares soared higher on Friday following comments made by a member of the US Federal Reserve.
What Happened?
Federal Reserve member John Williams stated that central banks should “act quickly” as a way of propping up the economy in anticipation of further economic headwinds. Investors have interpreted this and other similar comments to mean that the US Fed is almost certain to cut the US interest rate at the end of the month with the possibility of a cut of up to 50 basis points (0.5%).
The gold price is sitting around its 52 week highs after having a strong run the past month. Why? Gold is seen as a hedge against inflation and protection against a failing economy. The 4 best performing shares on the ASX200 Friday were all gold miners as investors scrambled to get in on the action.
ASX Gold Mining Shares
Resolute Mining Limited (ASX: RSG) and Northern Star Resources Ltd (ASX: NST) were up 7.08% and 5.98% respectively, with both making new 52-week highs in the process. Others gold miners to make new 52-week highs included Saracen Mineral Holdings Limited (ASX: SAR) which was up 2.98% and Regis Resources Limited (ASX: RRL) which climbed 4.93%. St Barbara Ltd (ASX: SBM) was 5.34% higher and Australia’s biggest listed gold miner Newcrest Mining Limited (ASX: NCM) rose 2.85%.
Will They Keep Rising?
It’s hard to say as there are many factors affecting the price of gold, which also act in irrational ways. However, with interest rates at record lows right around the developed world and fears of persistent sluggish growth, investors may increasingly take up positions in gold and gold shares as a hedge against inflation and economic risks.
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Disclosure: At the time of publishing, Luke has no financial interest in any companies mentioned.
