ASX: Gold price rally rush breathes life into ASX's precious metals ...

Despite gold trading above $3000 in local currency terms since October, shares in many ASX-listed gold developers have failed to track the higher prices. Even after jumping this week, Newmont is still down more than 10 per cent since it listed at the end of October.

Terra Capital, Paragon Funds Management and Victor Smorgon Group are among those that have piled into the sector in recent months, alongside Collins St Asset Management, which last year launched a special situations fund targeting the under-loved mid-cap gold mining sector.

Beat of its own drum

Likewise, Chester Asset Management portfolio manager Anthony Kavanagh has been adding more gold exposure to his firm’s high conviction fund, which holds Genesis Minerals, Westgold Resources and Spartan Resources.

He said while upping its exposure, the firm had noticed there were fewer buyers in the sector and noted that cost inflation had continued to drag on the industry in recent years.

“When I was first looking at gold, $US1000 an ounce was a really good number for an Australian gold producer,” he said.

“Now, around $US1500 to $US1700 has almost become the equivalent of $US1000, and that’s within a few years.”

Mr Kavanagh added that while the fund maintained an exposure to gold equities at all times, they were also bullish on the long-term outlook for the commodity, and he was not surprised by its recent strength.

“Gold acts at the beat of its own drum … we’re using that as an insurance mechanism,” he said.

“But we continue to have this underlying thesis that the US is in too deep in terms of deficit spending, which should lead to gold performing as a store of wealth over time.”

He added that renewed concerns of a banking crisis in the US were likely also adding to the recent price rise with investors attracted by its safe haven status.

Meanwhile, Citi’s senior commodities’ strategist Aakash Doshi has wound back his bullish call on the precious metal and encouraged investors to take profits after a spike in gold prices over the weekend.

“We previously anticipated bullion trading would face bearish short-term headwinds following hotter-than-expected US [inflation] data and record equity indexes,” he said in a note to investors on Monday.

“But that call was wrong, and the gold market sell-off was both limited in scope and short-lived,” he added. “We step aside for the time being, even if hawkish risk from [Fed chairman Jerome] Powell’s testimony and February US payrolls seem limited.”

He added the firm still likes gold as a hedge for a potential developed market recession, as well as a hedge for the growing risks around the US election.

Those concerns were amplified overnight after the US Supreme Court ruled former president Donald Trump will remain on the presidential ballot in Colorado, a major victory in his bid to return to the White House.

Spot gold climbed to $US2119.69 overnight on Monday – the highest since December 4, when it hit a record high. It was trading at around $US2113.82 on Tuesday afternoon.