Bullish on Gold's Prospects as Economic Risks Mount

• Gold prices appreciated 27% in 2024, outperforming most major asset classes.
• Catalysts for further gold price increases include equity bear market, crypto bear market, bond bear market, and U.S. dollar overvaluation.
• Despite bullish consensus forecasts, institutional and retail investors remain underweight gold.
• Supply constraints amid rising geopolitical and monetary risks could dramatically boost gold prices.
• Silver is more volatile but benefiting from industrial demand and persistent supply deficits.

As investors navigate an increasingly uncertain economic landscape in 2025, the case for owning gold has rarely looked more compelling. The yellow metal posted an impressive 27% gain in 2024, outpacing most major asset classes, and many analysts believe this could just be the beginning of a major bull run. With risks mounting in equities, bonds, and cryptocurrencies, gold offers a proven safe haven and store of value in turbulent times.

Surprising Underinvestment in Gold

Bullish gold price forecasts for 2025 have emerged from major banks like Goldman Sachs ($3,000/oz) and Deutsche Bank ($2,725/oz)^[1]. However, John Hathaway, Senior Portfolio Manager at Sprott Asset Management notes bullish prognostications by assorted experts have gone unheard by institutional and retail investors in the U.S. and Europe^[2]. Despite the strong consensus among analysts, gold remains underowned in most mainstream investment portfolios.

Hathaway points to the shrinking assets in gold-backed ETFs as evidence of this investor apathy,

"In 2024, ounces [in gold] declined 3.2%," Hathaway writes. "The gold market prognosticators' vision is not shared by financial advisors or their clients."^[2]

This disconnect between bullish analyst opinions and bearish investor positioning sets the stage for substantial capital inflows into gold and gold equities if consensus forecasts prove accurate.

"From a contrarian perspective, a nearly universal bullish consensus would be something to worry about," argues Hathaway. "What is intriguing is the discrepancy between bullish opinion and bearish positioning almost across the board in mainstream investment portfolios."^[2]

Potential Catalysts for Higher Gold Prices

Several potential shocks could jolt investors out of their complacency toward gold:

• Equity Bear Market: With stock valuations at historically extreme levels, the probabilities of poor equity returns over the next 3-5 years seem high. A turn in sentiment could send investors searching for safe havens like gold.

• Cryptocurrency Downturn: Bitcoin and other digital assets exploded in popularity in 2024, with the market cap of all cryptocurrencies reaching $3.7 trillion. However, security, energy consumption, and regulatory risks loom over the crypto space.

"Should a significant price pullback damage investor confidence, capital flows into gold would likely benefit from disenchantment with the crypto solution to long-term paper currency depreciation," contends Hathaway.

• Bond Bear Market: Bonds have failed to provide safety or diversification in recent years amid rising rates. Credit spreads remain near historic lows despite signs of stress among small companies, CRE, and consumers. A continued bond rout could drive safe haven demand for gold.

• U.S. Dollar Overvaluation: Experts like incoming Chairman of the Council of Economic Advisers Stephen Miran argue that persistent overvaluation of the U.S. dollar is contributing to global imbalances:

"The root of the economic imbalances lies in persistent dollar overvaluation that prevents the balancing of international trade, and this overvaluation is driven by inelastic demand for reserve assets. As global GDP grows, it becomes increasingly burdensome for the United States to finance the provision of reserve assets and the defense umbrella, as the manufacturing and tradeable sectors bear the brunt of the costs.” - Stephen Miran, newly appointed U.S. Chairman of the Council of Economic Advisers^[3]

If the new administration pursues a weaker dollar policy, gold would be a clear beneficiary.

Supply Constraints Meet Surging Demand

On the supply side, gold mine output faces headwinds from rising costs, declining ore grades, and scarcity of new large-scale deposits. Since 1980, above-ground gold supplies increased at a 1.79% CAGR, far slower than growth in the monetary base or federal debt. The total value of investable gold, around $4 trillion, pales in comparison to global financial assets.

Even a small rotation out of financial assets and into gold amid rising geopolitical and monetary risks could overwhelm available gold supplies.

"The potential change in the value of the dollar vs. gold over the next four years may well be measured on a geometric rather than linear scale," asserts Hathaway^[2]

West Red Lake Gold Mines

West Red Lake Gold Mines offers a compelling near-term gold production story in Ontario, Canada. With the recently completed pre-feasibility study demonstrating robust economics, including a $315M NPV, 255% IRR and $70M annual free cash flow at $2200/oz gold, WRLG is well-positioned to capitalize on the improving gold macro environment outlined in the article. The company benefits from substantial prior infrastructure investment of over $450M, enabling a low capex and quick path to production by mid-2025. This is key in the current inflationary environment impacting the mining industry.

As Shane Williams, CEO notes "...there are very few projects moving into production in 2025 and that's key with the gold price as it is today. We've used a conservative gold price of USD$2,200 and today gold is in a $2,600 environment..."

As West Red Lake Gold advances the Madsen mine through test mining and bulk sampling to build market confidence, it stands out as a unique opportunity in the junior gold space.

Kavango Resources

Kavango Resources made significant progress in 2024 to advance its dual-focused portfolio of gold in Zimbabwe and copper-silver in Botswana. The company's achievement of securing £6.5 million in funding to transition its Zimbabwean gold projects into production in 2025 is a major milestone, especially in the context of the constructive gold environment discussed in the macro article. Kavango's copper exploration upside in the prospective Kalahari Copper Belt also offers exposure to another critical metal likely to benefit from the global energy transition and growth in emerging markets.

Ben Turney, CEO, is ready to take advantage of a high gold price environment, and states that "...over the course of 2025 our focus is going to be on building significant cash flow generation within the business".

While Kavango is still an early-stage company, its unique combination of near-term gold production potential and district-scale copper exploration upside make it an interesting speculative play for investors looking to gain exposure to the new commodity supercycle.

Fancamp Exploration

Fancamp Exploration presents a differentiated junior mining opportunity with its diverse portfolio across precious, base, and specialty metals, as well as its prospect generator model. The company's strong balance sheet, with cash and marketable securities alone exceeding its market capitalization, provides downside protection and flexibility to advance projects with minimal dilution. This is especially important in the current environment of rising costs and scarcity of capital for junior miners.

Fancamp's significant stake in established iron ore producer Champion Iron aligns with industrial metals benefiting from infrastructure spending and growth in emerging markets. The company's exposure to critical metals like titanium and rare earths also fit the theme of supply shortages in materials needed for the global energy transition.

GoGold Resources

GoGold Resources is well-positioned to capitalize on the increasingly favorable political environment for mining in Mexico following the election of pro-mining President Claudia Sheinbaum open to the positive impact of a supportive government on unlocking a country's mineral potential.

Growth potential lies in GoGold's plans to develop two new mines at its Los Ricos property. The Los Ricos South project, with expected production of 8M oz/year silver equivalent at a low AISC of $12/oz, offers significant upside and could rapidly re-rate the stock as it advances towards production. The Los Ricos North project provides further optionality and could double GoGold's production profile to 16M oz/year, putting it in the realm of mid-tier producers. With $72M in cash, strong free cash flow from Parral, and access to debt financing, GoGold has the financial strength to deliver on its growth plans.

Palamina Corp.

Palamina Corp offers speculative exposure to a potential major gold discovery in the under-explored Puno Orogenic Belt in mining-friendly Peru. The company's encouraging drill results from its flagship Usicayos project, including 24 g/t gold over 2.3m, demonstrate the potential for a significant high-grade discovery that could be rapidly expanded.

The planned spin-out of Palamina's copper-silver assets into a separate vehicle offers additional upside and could help to crystallize value in an environment of growing demand and looming supply shortages for green energy metals. With a tight share structure, low valuation and backing from respected resource investor Eric Sprott, Palamina provides a compelling risk-reward proposition for investors looking for outsized returns in a gold bull market.

Magnetic Resources

Magnetic Resources' major 2Moz gold discovery in the Laverton region of Western Australia is shaping up to be a significant new source of mined supply in a premier global jurisdiction. With an upcoming resource update and robust PFS economics, including a A$925M NPV at current gold prices, MAU offers investors exposure to a potential near-term producer at an attractive valuation.

The company's strategic location near several operating mills provides a unique opportunity to potentially fast-track production and minimize capex through toll-treatment arrangements or a corporate-level transaction. With A$12M in cash, the company is well-funded to deliver its FS and advance this highly strategic asset in a rising gold price environment. The combination of a large high-grade resource, robust economics, strategic location and active M&A interest make Magnetic a prime takeover target.

Perseus Mining

Perseus Mining delivered another strong quarter operationally and financially, positioning it well to continue funding both growth and shareholder returns. The company's sustained output of over 120,000 ounces at an AISC around $1200/oz generate significant cash flow at current gold prices, with further upside as outlined in the macro article. Perseus's net cash and bullion position of $643 million and undrawn $300 million credit facility provide tremendous flexibility to advance organic growth opportunities, like the Yaoure underground mine, while maintaining capital returns.

The upcoming Feasibility Study update at the recently acquired Meyas Sands project in Sudan could also unlock meaningful value from a large, underappreciated gold resource. Trading at a discount to both Australian and African peers on earnings and cash flow metrics, despite its strong balance sheet and growth outlook, Perseus appears undervalued in the context of the constructive gold environment and scarcity of large gold assets globally.

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More Companies Poising for Market Growth:

• Alamos Gold: Alamos Gold achieved record annual production of 621,870 oz gold in 2024, exceeding the upper end of its increased guidance. The company expects 24% production growth to 680,000-730,000 oz by 2027 at significantly lower costs, driven by the Phase 3+ expansion at Island Gold and the ramp-up of the Lynn Lake project in Manitoba where construction has been approved.

• DRDGold: DRDGold is targeting 6tpa gold production by FY2028 through its surface tailings retreatment operations in South Africa. The company is significantly reducing its carbon footprint with a newly commissioned solar PV facility and offers a resilient, low-risk business model with a strong dividend track record.

• Equinox Gold: Equinox Gold achieved record gold production of 621,870 oz in 2024, benefiting from the successful ramp-up of the Greenstone mine in Canada. With $240 million in cash and a path to over 1 million oz/yr, the company is well funded to deliver on its growth plans in the rising gold price environment.

• Dryden Gold: Dryden Gold's exploration success at its Hyndman property in Ontario, with samples up to 34.8 g/t gold, demonstrates the district-scale potential of its strategic 70,000 hectare land package. This fits the upside for new gold discoveries in proven mining jurisdictions amid declining global reserves.

• Omai Gold Mines: Omai Gold Mines' rapid resource growth to 4.3Moz at its past-producing mine in Guyana positions it to become a significant new gold producer. With a positive PEA showing a $556M NPV and strong government support, Omai is a compelling investment opportunity amid the increasing interest in new projects in mining-friendly jurisdictions.

• Greenheart Gold: Greenheart Gold, spun out from Reunion Gold following the Oko West discovery in Guyana, is well funded with $50 million to explore for new Tier-1 gold deposits in the prolific but underexplored Guiana Shield. Greenheart's strong technical team and strategic land position align with the scarcity value for major new gold discoveries globally.

The Investment Thesis for Gold

• Gold offers a proven store of value and safe haven in times of rising economic and market risks
• Gold remains underowned by institutional and retail investors despite bullish consensus price forecasts
• Potential shocks to equities, bonds, crypto, and the U.S. dollar could spark a major rotation into gold
• Gold supply remains constrained even as geopolitical and monetary risks boost safe haven demand
• Even a minor shift out of financial assets and into gold could geometrically boost prices

With an impressive 9.23% CAGR since 2000, gold has demonstrated its enduring value and resiliency. As economic uncertainty mounts in 2025, the stars seem aligned for the yellow metal to embark on the next leg of its long-term bull market. Investors would be wise to reconsider gold's role as a portfolio diversifier and safe haven asset before the crowds inevitably rush in.

_References:

1. _{Lenihan, R. (December 2024). TheStreet.com. Analyst Revamps Gold and Silver Outlook Ahead of 2025}
2. _{Hathaway, J. (January 2025). Sprott Insights. Recalibrating Our Crystal Ball}
3. _{Miran, S. (November 2024). Hudson Bay Capital. A User’s Guide to Restructuring the Global Trading System}