We raise our near-term gold price assumptions
Our coverage remains overvalued.
After a brief pullback in October, the gold price resumed its relentless rise and is now trading at yet another historical high of around USD 4,600 per ounce. Concerns over the Fed’s independence add to strong ETF and central bank purchases and ongoing US fiscal deficits as major tailwinds.
Why it matters: Based on the futures curve, we now assume average prices of about USD 4,700 per ounce from 2026 to 2028, up from USD 4,000. We also roll forward our assumed midcycle price to 2030, from 2029, being about USD 2,050 based on our estimate of the long-run marginal cost of production.
The bottom line: Higher assumed near-term gold prices see the fair value estimates for our gold coverage rise by between 9% and 14%. But the higher gold price is more than reflected in the shares, and our coverage is materially overvalued by between 60% and 265%.
- Our fair value estimate for no-moat Agnico Eagle rises 14% to USD 80 per share. Our fair value estimates for no-moat Newmont, Kinross, and Evolution increase 13% to USD 70, USD 9, and AUD 4.50, respectively.
- Our updated estimate for no-moat Barrick is now USD 30, up 11%, while no-moat Northern Star’s and Perseus’ estimates rise 9% to $15 and $3, respectively.
Between the lines: Even with unit cash costs increasing across the industry in recent years due to inflation, the historically high gold price means we forecast higher near-term margins across our coverage compared to their historical averages.
- However, we assume margins return to around their historical averages midcycle, albeit adjusted where applicable for forecast changes in production volumes of existing mines and the company’s mine portfolio.
- Along with our assumption that the gold price returns to being driven by fundamentals based on supply and demand rather than by price-insensitive central bank purchases and pro-cyclical ETF flows, this accounts for the material overvaluation of our gold coverage.
