Australian Gold Miners Encashing The U.S-Dollar Bull Run

Australian Gold Miners Encashing The U.S-Dollar Bull Run

Gold prices have seen a sharp downtrend over the past three months. The prices of Gold Spot corrected to the level of US$1266.43 in April 2019 from the level of US$1346.79 in February 2019, correction of 5.96%.

The factor which exerted pressure on the gold prices in the international market was the improved trade relations between the United States and China, which in turn, led towards improved economic conditions, and exerted pressure on gold prices.

In the recent event, the re-escalation of the U.S-China trade war could not support the gold prices, as this time, the speculator and investor choose dollar as a potential hedge against the effect of bilateral disagreement over trade between the two significant economies of the world.

However, the plunge in the U.S-dollar-denominated gold spot (XAU-USD) seems to be least bothering few gold miners in Australia, and the shares of these miners are on an up-surge despite fall in gold prices.

One possible explanation of this upsurge could be the dollar bull run. The Dollar Index is in a continuous uptrend from the level of 95.40 in February 2019, and the prices rose from the February 2019 level to the level of 98.33 in April 2019, and to present month’s high of 98.37.

DXY Monthly Chart (Source: Thomson Reuters)

The dollar gained leverage against the Australian dollar, and the domestic currency of Australia depreciated from the level of US$0.7285 in February 2019 to the level of US$0.6986 in April 2019, the prices further fell to the present month’s low at US$0.6865.

The depreciating currency in Australia pushed the domestic market participants to hedge against the falling currency, and the prices of gold in the Australian market inched up substantially. The gold-denominated in the Australian dollar, i.e., XAU-AUD soared.

XAU-AUD Monthly Chart (Source: Thomson Reuters)

The XAU-AUD rose from the level of A$1807.78 in February 2019 to the current month’s high of A$1880.55, up by 4%. Such an increase in gold value made the shares of significant gold miners attractive, and the companies welcomed the gain in gold and surged on the Australian Securities Exchange.

Monthly Percentage Return (Source: Thomson Reuters)

Newcrest Mining Limited (ASX: NCM)

The share price of the company was on a continuous uprise from the level of A$18.570 (low in September 2018), and the boost in gold prices provided the shares with further momentum and the prices increased after a correction in February 2019 (A$23.980- month’s low) to the present level of A$26.780 (Day’s close on 24th May).

The prices corrected in April to the level of A$24.500 amid correction in Australian gold prices in April.

Evolution Mining Limited (ASX: EVN)

The share prices of the company inched up after a steep fall in April amid a fall in gold prices in Australia. The prices increased from the level of A$3.160 (low in April) to the present month’s high of A$3.745, an upsurge of 18.51%.

Saracen Mineral Holdings Limited (ASX: SAR)

The shares of the company also plunged in April amid fall in the Australian gold. The share prices of the company corrected till A$2.470 in April 2019 post rising to the present month’s high of A$3.320, a swing of 34.41%.


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