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Highlights:
- The S&P/ASX200 index extended its falling spree on Tuesday, declining 1.41%.
- Most of the sub-sectors in the index registered losses, but gold shares bucked the trend.
- The S&P/ASX All Ordinaries Gold sub-index rose 1.97% today, adding to Monday’s over 4% gains.
It was another day of correction for the S&P/ASX200 (ASX: XJO) index, as it fell 1.41% to close at 7,008.90 on Tuesday. At one point in time, it fell below the 7000 level for the first time since early January. Despite this market weakness, ASX gold stocks had a stellar run today.
Companies that mine the yellow metal were among the top five gainers today. Ramelius Resources Ltd (ASX: RMS) was the top gainer on the ASX200 index, rising 5.825%, while Perseus Mining Ltd (ASX: PRU) and Gold Road Resources (ASX: GOR) jumped 4.43% and 3.728%, respectively to be among the top five gainers in the benchmark index.
Some of these ASX gold stocks also registered handsome gains yesterday, despite the overall weakness in the market. So, what is behind this euphoria in ASX gold stocks?
Well, as the profitability of gold stocks is linked to the market price of the precious metal, today's gains in gold stocks seem to be triggered by the recent price gain of the yellow metal. Gold was trading around US$1,820 per ounce last week. But last night, the precious metal touched levels of US$1,915 per ounce.
As we all know that gold is viewed as a safe haven asset, and people prefer to hold this asset during times of crisis. With the collapse of Silicon Valley Bank late last week, there has been a panic in the global equity market, leading to a selloff in the equity market, specifically in banking shares on ASX and around the world.
Yesterday, we also saw two gold exchange-traded funds (ETFs) hitting fresh record highs. The S&P/ASX All Ordinaries Gold Index (ASX: XGD) added 1.97% today on top of Monday’s over 4% gains, clearly reflecting the euphoria in gold stocks.
But how long will this positive momentum in gold shares sustain is anybody’s guess now.