Insights

Is it time for ASX gold shares to make a comeback?

ASX gold shares have been spiraling lower since late 2020. Could it be time to give ASX gold shares another chance?
The post Is it time for ASX gold shares to make a comeback? appeared first on The Motley Fool Australia. –

Block of solid Gold and gold coins

ASX gold shares have been spiralling lower after gold prices topped in December 2020. With ASX gold shares recently bouncing off short-term lows, is it time for a comeback? 

What’s been driving ASX gold shares lower? 

Gold prices surged from US$1,200 to US$2,075 between May 2019 and August 2020. Similar to how soaring iron ore prices have propped up iron ore miners such as Fortescue Metals Group Ltd (ASX: FMG) and BHP Group Ltd (ASX: BHP), a higher gold price drove many ASX gold mining shares into all-time record territory. 

However, unlike iron ore, which has remained at elevated levels, gold has slumped roughly 15%. Down from US$2,075 to US$1,750 in recent months. 

To add further insult to injury, the soaring Australian dollar means that gold is even weaker when converted back to local currency. 

Why operational excellence is key 

Between late 2012 and early 2016, gold prices slumped from US$1,800 to US$1,050. 

During this period, Evolution Mining Ltd (ASX: EVN) increased its total gold production. This went from 346,979 ounces at a cash cost of A$771 per ounce to 803,476 ounces at an all-in sustained cost of A$1,014 per ounce. While its share price might’ve gone nowhere during this period, the company more than doubled its output. Furthermore, creating a runway for shareholder value when gold prices picked up. 

This might bring smaller ASX gold shares such as Bellevue Gold Ltd (ASX: BGL), Perseus Mining Limited (ASX: PRU), and Ramelius Resources Limited (ASX: RMS) into the picture. In particular, as gold producers are coming off of a lower production base and greater development upside.

Perseus, for example, is forecasting a 33% increase in gold production from 137,386 ounces in 1H21 to 182,500 ounces in 2H21. This is purely driven by the contribution of a new gold mine. 

What are brokers thinking about ASX gold shares? 

Back in March, Citi believed that gold prices had peaked in this cycle. It subsequently downgraded its gold price forecasts by 5% in 2021 to US$1,800/oz. However, the long term gold price remains unchanged at US$1,400/oz. 

The broker believes that key picks in the gold sector are ones positioned to generate cash through the next cycle. 

From an operational perspective, Credit Suisse prefers Evolution Mining. This is due to its low costs, strong free cash flow generation, and a positive production outlook. It believes Evolution shares come out ahead when it comes to quality, risk, value, and growth. 

Despite its preference for Evolution, the broker did acknowledge that its peers Newcrest and Northern Star offered more upside on a higher gold price scenario. 

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is it time for ASX gold shares to make a comeback? appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!