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AFR article:  Gold soars to $5000 in ‘once in 40-year gift’ for investors, fundies

Alex Gluyas and Mark Wembridge

Apr 1, 2025 – 6.00pm

The price of gold is about $5000 an ounce for the first time – and it’s not just investors in the commodity with a glint in their eyes. Money managers see fertile ground to do good business, reopening or launching gold funds as a wall of cash heads toward the safe haven asset amid worries the Trump administration’s economic plans spell trouble for sharemarkets.

 

Gold quoted in the local currency, a measure widely used by Australian miners, hit $5028 an ounce on Tuesday while the more widely quoted US dollar price also reached an all-time high above $US3133 an ounce.

The relentless rally over the past three months has pushed the gold price almost 20 per cent higher this year, its best quarter since 1986. It was only 18 months ago that the commodity was trading at below $US2000 an ounce, and fund managers see a decade-long gold rush that is not yet reflected in the share prices of Australian miners and explorers.

“I don’t think the general market has cottoned on to this, but we’re hopeful this is just the start of a genuine gold bull run that we haven’t seen for nearly 15 years,” said Collins St Asset Management’s Michael Goldberg.

“The past couple of gold bull markets lasted about 10 years and I reckon we’re only three to four years into this one.”

Collins St is among a growing number of money managers reopening or launching gold funds to capitalise on the strong demand from investors. The firm launched its gold fund in April 2023 and has reopened it this year following solid demand from clients who want to access the portfolio’s 77 per cent increase over the 12 months to February 28.

The rising gold price has come at a time of steep stockmarket sell-offs as investors grow increasingly concerned that US President Donald Trump’s trade tariffs will cause a recession in the world’s largest economy. Central banks around the world are also shifting their reserves away from the US dollar and toward gold, contributing to the sharp price rise.

L1 Capital, a firm that specialises in investing for super funds and family offices, has also launched a dedicated gold strategy as it seeks to capitalise on the same disconnect between the commodity’s price and the valuation of miners and explorers in the sector that Collins St forecasts.

“We’ve found it bizarre that the share price of these mid-cap gold stocks has barely rallied over the past year despite the huge earnings leverage that these stocks have to higher gold prices,” L1’s co-chief investment officer Mark Landau said. “We think the earnings for these stocks that we’ve bought are likely to increase 200 to 300 per cent as a result of [the rally].”

Citi estimates that ASX-listed miners are priced at valuations that reflect a gold price of between $US2250 an ounce and $US2500 an ounce, well below spot prices. The Wall Street investment bank attributed the disparity partly to the sector’s poor track record of delivering on guidance.

The commodity’s soaring price this year has left miners with their highest margins since the 1980s, Citi’s global head of commodities Maximilian Layton said, creating “a once in 40-year gift for gold producers”.

There are varying estimates among the brokers about how high gold will climb. RBC Capital Markets became the latest bank to upgrade its forecasts, tipping average prices of $US3039 an ounce this year and $US3195 in 2026.

Citi sees gold at $US3200 an ounce in the next three months.

Others are even more bullish. Goldman Sachs recently lifted its year-end forecast to $US3300 an ounce, Morgan Stanley said prices could hit $US3400, while Macquarie predicted they could reach $US3500.

While lithium remains in the doldrums and iron ore is stagnating, the higher gold price is also spurring on more dealmaking.

South Africa’s Gold Fields has gone hostile in its $3.3 billion takeover proposal of Australian joint venture partner Gold Road Resources; Northern Star, the country’s biggest gold miner, wants to buy De Grey Mining for $5 billion, while Spartan Resources and Ramelius Resources have agreed to tie the knot in a deal that values the combined group at $4.2 billion.

The shift has also prompted the re-emergence of long-dormant mines around the country, as higher prices turn previously uneconomical mines into viable propositions. Historical gold mining areas around Coolgardie in Western Australia and St Arnaud in Victoria are experiencing such revivals.

RBC’s Alex Barkley suggested several miners were undervalued, especially mid-tier operators Westgold Resources, Bellevue Gold and Vault Minerals.

“Given improving earnings and balance sheets, we generally favour perceived ‘lower quality’ mid-tiers, ideally with relatively unhedged production,” he wrote in a note to clients.