The huge disconnect between the price of gold and gold stocks has hurt investors over the past two years, and it’s a question worth pondering whether this situation will improve in 2024 as the Federal Reserve is expected to begin to cut interest rates.
This week, Ross Beaty, chairman of the board of directors of Pan American Silver Corp. and Alterra Power Corp. said the gold market is currently navigating its way through uncharted territory, which has never been seen before.
He noted that the discrepancy between gold and gold equities is so severe that it is a major anomaly that challenges traditional market correlations and investor expectations.
Spot gold prices recorded a 13 per cent annual gain in 2023, the best year for the precious metal since 2020, and hit an all-time high of $2,135.40 an ounce in December. Meanwhile, large-cap gold mining stocks, represented by the VanEck Gold Miners ETF (GDX), are down 16.95 per cent year to date; junior gold miners’ stocks, represented by the VanEck Junior Gold Miners ETF (GDXJ), are down 17.95 per cent year to date.
Ross Beaty says the current state of gold stocks is puzzling, but the bullish outlook for gold won’t change and is confident that a valuation repair is imminent. His company, Equinox Gold, has seven operating gold mines since its inception and is in the process of building one of the largest gold mines in Canada, Beaty said, adding that Equinox Gold’s momentum matches management’s forecast of continued upward momentum in the price of gold, and that the company’s 17 per cent decline in shares year-to-date is a great opportunity for potential investors. .
Beaty notes that gold stocks have lagged badly compared to gold over the past 15 months, and have failed to reflect the strong price performance of gold, something unheard of in his career. The gold market has its own unique complexities, and this anomaly may provide strategic investment opportunities for investors looking for upside.
With the Federal Reserve likely to begin cutting interest rates this year, the impending weakening of the US dollar, and the proliferation of geopolitical events, analysts are predicting a bright outlook for gold in 2024, with the precious metal’s safe-haven status cemented. Beaty advocates that investors adopt a diversified investment strategy this year, emphasizing the huge potential for junior developers and producers in the current market dynamics.
The Prospectors & Developers Association of Canada’s (PDAC) 2024 Convention – The World’s Premier Mineral Exploration & Mining Showcase – will commence March 3-6, 2024 in Toronto.
Visit www.pdac.ca/convention for more information. The public is welcome to attend.
