With the global gold market in overdrive, a new research report by Argonaut Securities signals an increasingly bullish outlook for the yellow metal, projecting prices to breach US$3,000/oz by 2026. Gold prices have already surged by nearly 30% in 2024, driven by economic uncertainty, ongoing inflation, and rising US government debt. Argonaut's analysts have now upgraded their gold price forecasts by as much as 35% over the next few years, significantly boosting the earnings and price targets for ASX-listed gold producers and explorers.
Bullish Forecasts: Gold to Hit US$3,000/oz
In its latest gold sector review, Argonaut highlights a perfect storm of macroeconomic factors driving gold prices higher. Uncertainty over US interest rate cuts, persistent inflation, and a ballooning national debt are creating conditions for gold to rally further. The report forecasts gold prices to rise 11% in FY25, with further upgrades of 26% in FY26 and 35% in FY27, pushing prices above US$3,000/oz by 2026.
The report also upgraded the long-term gold price forecast from US$1,850/oz to US$2,000/oz, reflecting rising industry costs and inflation.
Significant Upside for ASX Gold Stocks
Argonaut’s analysis offers broad upgrades across ASX-listed gold producers, developers, and explorers. Major producers like Northern Star Resources (NST) and Genesis Minerals (GMD) saw price targets rise between 8-17%, while Catalyst Metals (CYL) experienced a 47% increase. Top picks among Australian producers include Westgold Resources (WGX), Capricorn Metals (CMM), and Genesis Minerals (GMD), all poised for strong growth due to high production rates and cost efficiencies.
In the developer space, De Grey Mining (DEG) and Ora Gold (OAU) stand out, with respective price target increases of 17% and 20%.
On the international front, Perseus Mining (PRU) and West African Resources (WAF) both saw price target upgrades, with PRU rising 20% and WAF increasing 13%. WIA Gold (WIA) also benefited from a 36% rise in its target, reflecting its strong valuation leverage.
West African Resources Addresses Concerns Over Mining Permits
While West African Resources (WAF) is enjoying positive momentum from rising gold prices, concerns recently surfaced about the security of mining permits in Burkina Faso following a public address by the country’s President. In response, WAF has confirmed that none of its mining permits are under review and all remain in good standing.
The company issued a statement clarifying that President Traore’s comments about potential permit withdrawals were directed at companies violating local laws. WAF, which operates in compliance with Burkina Faso's legal framework, reassured investors that its operations continue unaffected. CEO Richard Hyde noted: “Officials from the Ministry of Mines and Quarries confirmed that none of WAF’s mining permits are under review, and all remain in good standing.”
Despite geopolitical risks in Burkina Faso, WAF remains one of Argonaut’s top international picks due to its strong production growth outlook and favourable cost structure.
Earnings Skyrocket Alongside Prices
The bullish gold price forecast is translating directly into significant earnings upgrades for Australian producers. On average, earnings forecasts for FY25 are up 33%, while FY26 and FY27 see even greater jumps of 100-200%. Notably, Ramelius Resources (RMS) and Regis Resources (RRL) are expected to see FY27 earnings surge by over 600% as they ramp up production and capitalise on higher gold prices.
For developers, earnings outlooks are mixed, depending on the timeline for first production. However, key players like De Grey Mining (DEG) and Spartan Resources (SPR) are expected to start generating substantial earnings from FY26 onwards, offering significant upside as production ramps up.
Valuations: Sector Looking Cheap
Despite the surge in gold prices, several ASX gold stocks remain attractively priced, especially given their future cash flow potential. RRL, RMS, WGX, and VAU are all trading at FY25 EV/EBITDA multiples of 2.6x or less, making them appealing to value investors. By FY27, stocks like CYL, RRL, and WGX are expected to see EV/EBITDA multiples drop below 1.0x, as rising cash balances reduce enterprise values.
In terms of production growth, Capricorn Metals (CMM) and Genesis Minerals (GMD) lead the pack, with five-year compound annual growth rates (CAGR) of 20%, well above the sector average. This combination of organic growth and attractive valuations is expected to drive continued strong performance for these stocks.
Underperformance Provides Opportunities
Despite gold’s strong performance, many gold equities have lagged behind the metal’s rise. Over the past week, only a handful of stocks, including CYL and MAU, have outperformed the A$ gold price. In contrast, Westgold Resources (WGX) underperformed due to concerns over cash generation and outflows related to its merger with Karora Resources.
However, long-term prospects remain positive. Over the past three months, emerging producers like Ora Banda Mining (OBM) and CYL have seen share prices surge by 140% and 80%, respectively, positioning them for further growth.
With soaring gold prices, significant earnings upgrades, and attractive valuations, the ASX gold sector is poised for further gains. Investors may find value in companies with strong production growth and low multiples, as the market continues to anticipate further gold price increases. As the sector marches towards US$3,000/oz, key players like Westgold Resources and Capricorn Metals are well-positioned to reap the rewards.
