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Why are gold stocks not following the metal at record highs?

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Why are gold stocks not following the metal at record highs?

Hi team . I am a long term subscriber who is addicted to your service. It is the best I have found. I have a question. With gold at record highs why are Australian gold mining stocks not flying? Or is there a divergence between the current gold price and the gold shares in general. Do you think this will change in the future ? Thanks Andrew

Answer

Hi Andrew,

Unfortunately as you say the gold stocks both in Australia and overseas are bearing very little resemblance to underlying price of precious metals, even more so when we consider the gold price in Australian Dollar terms! There are two key reasons behind this relative underperformance:

  • A number of the local miners have been struggling operationally both on the production and costs front.
  • Interest rates remain very elevated compared to the last decade hence giving investors the viable alternative of fixed interest over gold stocks and the precious metal itself.

Ultimately, we think this will change, hence we own some gold shares across portfolios.

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Gold Spot ($US/oz)
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