Top 3 ASX gold stocks to watch amid rising volatility

As gold prices remain elevated, we examine how some of Australia’s largest gold miners have performed in recent months.

Low Aussie dollar leaves gold miners sparkling

Australian gold miners have caught a sweet spot between surging gold prices and the falling Australian dollar.

Since mid-2019, when gold was trading at less than US$1,300 an ounce, the precious metal staged a steady rally going into 2019, just as volatility was set to attract risk-averse investors.

After a quick price plunge in March of almost US$200, gold is now trading around US$1,680. Just a few days ago it was comfortably above US$1,700 before some of the fear came out of coronavirus trading and the safe haven asset eased.

You can see this in the VIX volatility index, which is known colloquially as the ‘fear index’. This index becomes one of the all-important barometers during times of market turbulence.

The VIX index spiked to almost 80 in mid-March, past levels reached during the global financial crisis, just as the gold price was reaching its highs. The two have come off together.

However, the Australian miners have been in an even sweeter position due to currency markets.

Gold in Australian dollar terms surged above $2,700 for the first time ever in March. Moreover, the Australian dollar has been on a steady decline against the US dollar, largely as Australian interest rate expectations switched from hawkish to dovish.

Newcrest Mining, Northern Star Resources, and Evolution Mining share prices in focus

Though gold prices are currently sit at multi-year highs, some Australian miners have missed a once in a generation opportunity due to production issues.

Newcrest Mining, Australia’s largest gold miner, booked its lowest production levels in seven years for fiscal 2020 after a big downgrade in March. Operational problems at its Lihir and Telfer mines were behind the bad news.

Geology problems forced fellow gold miner Evolution Mining to cut gold production from its Mt Carlton mine by 27% in January.

And finally, Northern Star Resources told the market last month the coronavirus had hurt gold production in the first three months of the year by 10-15%.

Given all that, it’s remarkable that only Newcrest is down since January. Its shares have lost 8.6% while Northern, by contrast, is up 12%. Evolution has added a startling 24% since the start of 2020.

Not a bad result when you consider that the benchmark ASX 200 index is off approximately 20% for the year.

Investors have to ask what will happen to the gold price and how will it impact the Australian miners?

As long as prices remain at or near these historically high levels, gold miners can earn a nice premium. Importantly, they don’t need prices this high in order to potentially book a profit, either.

As for the Australian miners, investors will get a good look at them in the coming weeks. Evolution Mining is also expected to report its quarterly figures on 23 April. Northern Star is due to hand down quarterly numbers on 28 April, and Newcrest will follow up on 30 April.

Every extra ounce of gold they can find will fetch a good price.

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