Fools gold or why the rally in gold stocks in Australia is a bit of a mirage?
In February of this year the US dollar gold price was around $US1,000 an ounce and the Australian dollar was worth around 66 US cents.
That gave an Australian dollar gold price of $A1516 an ounce, which was fat, profitable and very comforting.
Tuesday night the world gold price hit a trading high of around $US1037 and yesterday ended around $US1039 an ounce in Asian trading.
At the exchange rate of 89 US cents that gave a price of $A1167.
Last night gold touched a high of $1048.40 an ounce in trading and ended at $US1044.40 in New York.
The Aussie dollar eased to around 88.90 US cents. That gave a local price of $A1076 in rough terms.
Had it been at 66 US cents, the price would have been around $US1582 an ounce.
But the Australian dollar has appreciated by around 34%since earlier this year and the $A gold price is up by around 23%.
So why then did gold investors chase local gold stock higher yesterday?
The answer: misplaced enthusiasm and not thinking of the impact of the $A’s continued rise.
Certainly the $A gold price firmed from around $A1154 an ounce on Tuesday to $US1167 yesterday at the close, but that won’t be sustained for long.
Gold stocks and the continuing fallout from the Reserve Bank’s decision to raise interest rates helped push the local market up 2.3% or around 104 points yesterday (for the ASX200).
The All Ordinaries added 98.6 points, or 2.1%, to 4695.8 points.
The gold sub-index led gains, jumping 5.9%. Materials also rallied 3.9%, while financial stocks rose 2.7% and energy shares were up 1.5%.
Lihir Gold earlier jumped 17 cents, or 5.4%, to $3.14 and Newcrest Mining added $2.22, or 6.7%, to $35.15.
Sino Gold climbed 47 cents, or 6.9%, to $7.27, and St Barbara added 2.5c, or 8.2% to 32.5 cents.
Newmont jumped 22 cents, or 4.4%, to $5.18, and AngloGold Ashanti was 95 cents, or 10.5% higher at $10.00.
The spot price of gold in Sydney was $US1039.10 per fine ounce, up $US17.97 on Tuesday’s closing price of $US1021.13.
