Is it finally time for ASX investors to buy gold?

After a few weeks of fury and frenzy over gold prices, ASX investors seem to have moved on to bigger and better things. I get it. When gold falls from record highs of more than US$2,089 an ounce to today’s price of US$1,943, shares like Zip Co Ltd (ASX: Z1P) – which shot up more than 27% just yesterday – are just more interesting. It’s funny how it’s only when an asset is reaching record high prices that everyone wants a piece of the action.

But now that the market for the precious metal has cooled somewhat, is this pullback in the gold price a buying opportunity for gold, gold exchange-traded funds (ETFs) or gold mining shares?

Does gold still glitter?

The gold price is now down around 7% from the all-time highs reached earlier this month on 7 August. Even so, it remains above the previous all-time high of US$1,921 an ounce that held between 2011 and August 2020.

Gold miners (themselves a leveraged bet on the gold price) have also fallen over the past month. The ASX’s largest gold digger Newcrest Mining Ltd (ASX: NCM) is trading for $32.23 today (at the time of writing), down more than 12% since 6 August. Other gold miners have faired similarly. Saracen Mineral Holdings Limited (ASX: SAR) is down 19% over the past month, whilst Northern Star Resources Ltd (ASX: NST) is down more than 15%.

On one level, this isn’t an extraordinary move. Global share markets have had a very good August so far. The S&P/ASX 200 Index (ASX: XJO) is up 3.7% so far this month, whilst the flagship American index the S&P 500 is up 6.5%. Gold is traditionally a ‘risk-off’ asset, which means it tends to fall in value when ‘risk-on’ assets like shares are rising.

But I still think there’s room for the gold price to climb higher. And if I’m right, this small pullback we have seen in August might represent a good buying opportunity if you missed the boat on the last gold rally.

I still think gold has room to climb because the factors that drove gold’s rally from around US$1,519 an ounce at the start of the year to today’s levels haven’t gone away.

The coronavirus pandemic is still (unfortunately) wreaking havoc around the world, despite the recent performance of global share markets.

Central banks are still printing unprecedented levels of monetary stimulus.

And interest rates are still at record lows, both in Australia and around the world.

Foolish takeaway

If this current rally that we’re seeing in shares abates, I would expect interest in the gold price to pick up once more. And if that happens, it might be too late to get in at the prices that gold-related assets are seeing today. Long story short, if you want to have some exposure to gold in your portfolio but you missed your chance last time, today might be a good day to take the plunge.

More reading

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• Why the IGO share price is outperforming the ASX 200 today
• Why Bega Cheese, De Grey Mining, Northern Star, & Reece are storming higher
• Why this ASX tech ETF can ride the market gains higher
• Why the CBA share price could surge this morning

Sebastian Bowen owns shares of Newcrest Mining Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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