It’s been a good day on the ASX 200 for some of Australia’s top gold shares. We look at what’s helping drive investor interest.
The post Why these 3 ASX 200 gold shares are racing higher today appeared first on The Motley Fool Australia. –
S&P/ASX 200 Index (ASX: XJO) gold shares are in the spotlight today.
Three of the top ASX 200 gold shares are all racing higher in late afternoon trading.
The Newcrest Mining Ltd (ASX: NCM) share price is up 3.7% to $27.69 per share.
The Northern Star Resources Ltd (ASX: NST) share price has gained 2.9% in intraday trading, currently at $11.21 per share.
And the Evolution Mining Ltd (ASX: EVN) share price leads the golden charge, with Evolution shares up 3.9% to %4.59 per share.
What’s supporting ASX 200 gold shares?
ASX 200 gold shares are broadly enjoying a lift in the gold price.
Analysts are crediting the yellow metal’s rise with a fall in the US dollar and declining US bond yields. Adding to that, growing angst over possible rising inflation may be spurring investors to seek out the classic inflation hedge.
An ounce of gold is currently worth US$1,763.48 (AU$2,281.35). That’s the highest level since 25 February.
Now, that’s well below the record high levels of just over US$2,065 per ounce, reached on 6 August last year. But it’s still up 4.6% since 31 March.
In that same time, Evolution Mining shares have gained 10.8%, while the Newcrest share price is up 13.5% since 31 March, and the Northern Star share price has soared 17.8%.
As my Foolish colleague, James Mickleboro, pointed out earlier today, Northern Star and Newscrest may be enjoying an extra boost thanks to a note from Goldman Sachs. The broker has upgraded both ASX 200 gold shares from neutral to a buy.
Why are the miners’ shares outpacing the price gains of gold?
If you look at the share price gains above again, you’ll see that the ASX 200 gold miners have seen their shares increase by more than double the gains in the gold price. In the case of Northern Star Resources, shares are up 286% the price of gold since 31 March.
Now that won’t always be the case. Other factors certainly impact on gold miners’ share prices. These include safety records, weather, drilling results that impact their gold estimates, and their costs to dig the yellow metal from the ground and bring it to market… among others.
But the price of the precious metal they dig from the ground does tend to have an outsized impact on their share prices.
You may have heard it said that gold shares are leveraged to the price of gold.
That’s because a gold miner’s costs are mostly fixed, regardless of whether they’re receiving $1,000 per ounce for their product or $2,000. So when the price does rise, as it’s done over the past 2 weeks, almost all of that goes straight to the miner’s bottom line.
And to a rising share price.
Do these miners pay dividends too?
Although many investors buy shares in gold miners hoping for some big share price gains, all 3 of these ASX 200 gold shares pay dividends as well.
Northern Star has a market cap of $13.0 billion and trades on a P/E ratio of 26.2 times. Northern Star pays a dividend yield of 1.70%.
The leading dividend payer among the 3 ASX 200 gold shares is Evolution Mining. Evolution has a market cap of $7.8 billion and trade on a P/E ratio of 20.5 times. Evolution pays an annual dividend yield of 3.49%.
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Motley Fool contributor Bernd Struben 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.
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