Gold Miners: We Raise Our Near-Term Gold Price Assumptions, but Our Coverage Is Overvalued

After a brief pullback in October, the price of gold resumed its relentless rise, and the precious metal is trading at yet another historical high of around $4,600 per ounce. Concerns over the Federal Reserve’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 $4,700 per ounce from 2026 to 2028, up from $4,000. We also roll forward our assumed midcycle price to 2030 from 2029 being about $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 9%-14%. But the higher price is more than reflected in the shares, and our coverage is materially overvalued by 60%-265%.

• Our fair value estimate for no-moat Agnico Eagle rises 14% to $80 per share. Our fair value estimates for no-moat Newmont, and Kinross, and Evolution increase 13% to $70, $9, and AUD 4.50, respectively. Our updated estimate for no-moat Barrick is now $30 (up 11%), while no-moat Northern Star’s and Perseus’ estimates rise 9% to AUD 15 and AUD 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 with 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 price-insensitive central bank purchases and pro-cyclical ETF flows, this accounts for the material overvaluation of our gold coverage.