Gold has continued its strong run since our January 2025 thematic note, pushing above $3,050/oz. We now argue that investors should shift their focus to gold mining equities to maximise returns. With Gold Fields’ recent bid for Gold Road Resources at a 28% premium, we believe a sector consolidation phase is beginning, offering compelling opportunities across the mining spectrum.
Key themes
- The gold price has reached approximately $3,050/oz, confirming our thesis that we are in the early stages of a major rebasing.
- Historical analysis demonstrates distinct waves in which rising gold prices flow through different segments of the market.
- We believe gold mining equities are entering their most rewarding phase, with the foundation of strong gold prices now established.
- M&A activity is accelerating, signalled by Gold Fields’ recent bid for Gold Road Resources at a 28% premium.
- Gold miners offer true diversification, with a very low correlation to the S&P 500 (0.24 over 10 years
Core insights
- Potential upside to $3,300–4,500/oz for gold based on our three-pillar framework.
- Central bank buying has continued to provide structural support, contributing 7–10% to gold’s price performance.
- With gold at $3,050/oz and average all-in sustaining costs for the sector around $1,400/oz, margins for quality producers are exceptionally robust.
- After three years of net outflows, both physical gold and gold equity ETFs are seeing renewed buying interest.
- Attractive dividend yields now exceed the S&P 500 average.
Companies highlighted:
Streaming companies:
- Wheaton Precious Metals: offers a combination of gold exposure, yield and growth potential
Major producers:
- Agnico Eagle Mines: delivered EPS growth approximately 30% greater than gold’s price movement over 2010–24
- Barrick Gold Corporation: trading at attractive valuations
- Newmont Corporation: world’s largest gold producer
- Kinross Gold Corporation: Americas-focused producer
Mid-tier producers:
- Pan African Resources: strong operational performance and disciplined capital allocation
- Alkane Resources: Tomingley operation performing well with Northern Molong Porphyry Project offering significant revaluation catalyst
Junior explorers and developers:
- KEFI Gold and Copper: in the final phase of financing its project in Ethiopia.
- Barton Gold: young, dynamic management with clearly defined business plan and strong focus on minimising equity dilution.
Investment conclusion
We recommend a tiered approach to gold equity investment:
- Establish a foundation: physical gold and streaming companies provide lower-risk exposure with meaningful upside.
- Build core positions: focus on quality majors trading at discounts to theoretical valuations.
- Add growth exposure: select mid-tier producers offer superior growth profiles.
- Selective exploration upside: concentrated positions in high-potential juniors with near-term catalysts.
With margins at multi-year highs, balance sheets strengthening and M&A activity accelerating, gold equities offer compelling risk-adjusted returns at this point in the precious metals cycle.
