Revived gold comes shining through
The beleaguered gold sector has started to show some sparkle again, as the precious metal remained near one-month highs following an unwinding of short positions and weaker than expected US housing data.
Gold stocks on the Australian sharemarket closed 3.9 per cent higher on Tuesday, led by gold, nickels and base metals exploration company Sirius Resources, the biggest gainer on the S&P/ASX 200 Index at 13.04 per cent.
The price of gold, which has been battered by a strengthening US dollar amid expectations of a possible end to the country's monetary stimulus program, has slipped by more than 20 per cent this year. The gold price slumped to a low this year of $US1184 in late June.
It was trading at $US1333.10 late on Tuesday, a 0.2 per cent fall from Monday's 3 per cent gain. The gold price has risen more than 12.5 per cent in almost two months.
"I think we might be able to see the gold price — over the short term — retraced to about the $US1400 level. I think that's where it runs into some resistance," RBS Morgans' director of equities, Tony Dennis, said.
Mr Dennis said he expected the gold price to rally further, especially as the markets were heading into the seasonally strong months for the gold price: July to September.
But he expected the ongoing trend of a strong US dollar to keep a lid on the price beyond $US1400.
Panaust Ltd finished strongly, with a 5.56 per cent gain on Tuesday, while Newcrest Mining was the fourth-biggest gainer on the ASX 200 at 5.44 per cent. Alacer Gold CDI rose 5.26 per cent while Paladin Energy lifted 3.85 per cent.
But other stocks, such as Medusa, Perseus and Resolute Mining, shed their early gains to close more than 3 per cent lower.
ETF Securities' head of Australia and New Zealand, Danny Laidler, said he expected the recent gold rally to remain sustainable in the medium term amid strong physical demand from China, continued volatility in share markets and less positive economic data from the US and China.
"When you combine that with the fact that the price correction has brought gold back down to an attractive value, then I think in the medium term, the outlook for gold is very positive," Mr Laidler said.
"It's not that people are getting wildly bullish on gold, they're just not as bearish any more."
The price of the precious metal was about $US1600 when it slumped in April, and again in June, pushing some of Australia's highest-cost gold mines into the red. Jobs were shed as miners cut back costs and focused on more profitable mines.
Macquarie Private Wealth analysts said they continued to see gold as as an underperformer in the short and medium terms compared with the broader market, but said low-cost operators such as Regis Resources and Beadell Resources were standouts in the sector.