Since gold touched its recent lows of $1,200/ounce at the end of June, the gold price has rallied over 10% to nearly $1,340/ounce. While the gold price is still a far cry from the levels seen in late 2012, it looks like some share market participants see value at current levels.
The rise in the gold price has put a rocket under gold miners today. While the broad S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is up 0.3%, gold stocks are faring much better. Of the top 10 gainers in the index today, five are gold miners: Sirius Resources (ASX: SIR) is up 14%, Evolution Mining (ASX: EVN) is up 6.9%, Newcrest Mining (ASX: NCM) is up 6.4%, PanAust (ASX: PNA) is up 4.5% and Kingsgate Consolidated (ASX: KCN) is up 4.4%.
Given the inherent leverage most gold miners have to a higher gold price, and considering the significant declines this calendar year in share prices (many over 40%), it is perhaps not surprising that gold miners are starting to see some support.
While investing with a contrarian mindset certainly has its benefits, investors should also not forget how unpredictable the gold price can be.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.