Shares in precious metals miners, including Fresnillo PLC (LSE:FRES) and Endeavour Mining PLC (LSE:EDV, TSX:EDV, OTCQX:EDVMF), were given another boost as the spot gold price continued to reach new record highs on Tuesday.
The gold price rose above $3,697, up from around $3,640 at the end of last week and near $3,340 a montho ago.
In London, shares in Fresnillo topped the FTSE 100 leaderboard, up 3.7% to 2,278p, just a few pennies from the all-time high reached on Friday, while Endeavour rose 0.8% to 2,916p after notching a new record high of 2,944p in early trade.
On the FTSE 250, Hochschild Mining PLC (LSE:HOC, OTCQX:HCHDF) shares rose 1.6%, while among smaller caps, Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) and Greatland Resources Ltd (AIM:GGP, OTC:GRLGF, ASX:GGP) rose 7.5% and 2.7% respectively.
A weaker dollar and growing conviction around Fed rate cuts is fuelling demand for the yellow metal and other real assets, says analyst Matt Britzman at HL.
"With inflation still simmering and central banks pivoting toward easing, investors are increasingly faced with a simple choice: ride the wave of asset inflation or stick with cash and risk being left behind."
Gold has already rallied by almost 40% this year, with many analysts citing demand from investors amidst continued geopolitical uncertainty.
Charu Chanana, Saxo chief investment strategist, said some demand for gold in the past two years may have been held back due to high interest rates, which "made gold less attractive as it pays no income".
But when rates fall, the "carry drag" from holding gold shrinks, she says, making bullion more appealing for investors who had previously preferred yield.
"Meanwhile, structural trends continue to support gold as central bank demand remains robust, and with policy and geopolitical uncertainty still elevated, gold continues to play an important role as a hedge."
As for gold mining companies, an investment here offers "leveraged exposure to the gold price because revenues rise with bullion, while costs (energy, labour, equipment) move at a slower pace", Chanara says.
"When gold is trending higher, miners can outperform bullion, though they also carry greater volatility and operational risks."